After nearly three and a half years of writing The Credit Crunch, I finally achieved a major breakthrough: my wife was genuinely impressed by one of my newsletters.

Two weeks ago, I wrote about Apollo’s memorable “Don’t mistake the sprinkle for the cupcake” campaign. Apollo’s team followed up with the most convincing piece of marketing yet: a box of cupcakes for me and my friends.

Not wanting to get carried away, but if there is any read-across here, I may have to start writing about private jet finance and see whether Apollo can persuade Perseus Aviation to send a little something my way.

Reading on Outlook? The charts won’t render - Read it online

📕 Reads of the Week

Market Updates

Private Credit's Much Warranted Reset: Three Lies and a Truth

It’s great to see join the Substack community.

As expected, his first post is definitely worth reading.

👉 Private Credit’s Much Warranted Reset

Private Credit Leads the Next Wave of Institutional Allocations

Aviva’s 2026 private market study taps into the views of 500 institutional investors managing $6.5 trillion in assets.

Nearly half of these investors plan to increase private market allocations over the next two years. Infrastructure and Private credit stand out as the asset classes with the strongest net increase intentions.

Real estate shows the weakest allocation momentum. The gap between those investors planning to increase exposure versus those intending to reduce is small, reflecting the impact of higher interest rates, valuation resets, and structural challenges.

👉 Aviva’s Private Market Study

Borrower Defaults Remain Below the Long Run Average

Borrower defaults across the direct lending market remain low at roughly 2.0%, below the historical long-term average of 2.7%.

👉 Blue Owl’s Mid-Year Outlook

Manager & LP Updates

Cox Capital Announces Three BDC Tender Offers

Cox Capital launched a tender offer targeting investors in HLEND, ADS, and ASIF.

Cox is initially looking to acquire $30.5 million, at discounts of 15% to 30% to each fund’s reported Class I NAV as of May 31, 2026.

“Repurchase demand ran well ahead of issuer program capacity again last quarter, and we believe the industry needs a standing utility for the unfilled remainder. For a holder seeking full liquidity, the practical arithmetic is a blended exit: shares accepted by an issuer program are repurchased at or near net asset value, remaining shares can be sold to us.”

John Cox, Chief Executive Officer and Chief Investment Officer of Cox Capital Partners

It’s important to flaf these offers are very small relative to the total universe of investors in these funds. For context, the three funds hold roughly $38–40 billion in aggregate NAV, making the $30.5m tender about 0.1% of the combined NAV.

👉 Cox Capital’s Press Release

BlackRock’s $12Bn Meta Deal

BlackRock is preparing a debt sale of more than $12 billion to help finance a Meta data center project. The transaction combines investors from Global Infrastructure Partners and HPS Investment Partners, who are reportedly offering a single tranche of notes due in 2048, priced at a premium of about 2.875 percentage points over Treasuries (~7.1% all in).

Proceeds from the sale will fund a 1 GW data center campus in El Paso, Texas.

👉 Announcement 1 and Announcement 2

AustralianSuper targets $20bn private credit portfolio

AustralianSuper’s plans to double its private credit portfolio to $20 billion within four years.

As more members move into decumulation, super funds need to think about how portfolios deliver more predictable income streams and support members throughout retirement.

Against that backdrop, AustralianSuper has broadened its approach to credit investing by bringing private credit into its wider fixed income portfolio, allowing investment opportunities to be assessed across public and private markets rather than in isolation.

👉 AustralianSuper News

TD Asset Management launches its global private credit strategy

The fund is integrated into the TD Greystone private markets platform that manages $30 billion of assets. It invests in direct lending (middle market corporate credit), real estate debt, infrastructure debt, and specialty finance markets. It will target an unlevered yield of an 8% to 10%.

👉 TDAM Announcement

Partnership Updates

Wellington, Vanguard, and Blackstone Launch All-Private Fund

The partnership provides Merrill and Bank of America Private Bank clients with a simple access point to Blackstone’s perpetual private markets platform. This includes private credit, private equity, private infrastructure, and private real estate, in a single allocation. They will also explore additional distribution opportunities across the wealth ecosystem over time.

👉 Blackstone announcement

Evercore: Credit Secondaries Are Accelerating

I’ve written about the credit secondaries already this year (Link), but Evercore has since published some excellent data on how this year is playing out.

Below are my key highlights.

👉 Read Evercore’s Full Report

GP-led pricing has held firm,

GP-led transactions continued to price at ~99% of FMV on average, supported by greater access to information, direct sponsor engagement and increased buyer confidence in the ability to underwrite borrower-level performance.

While buyers became more selective during periods of volatility, competition for high-quality, senior-secured portfolios remained strong.

GP-led Credit Secondary Transaction Pricing

(% of FMV Before Post-Reference Date Cash Flow Adjustments)

LP-led Credit Secondary Transaction Pricing

(% of NAV Before Post-Reference Date Cash Flow Adjustments)

The majority of available capital is focused on senior

Buyers typically target 10%-15% levered net IRRs (with transactions generally levered at or around 50%+ LTV).

Second Lien / Mezzanine and Opportunistic strategies target progressively higher returns.

Buyer Target Returns by %

BDC Rising Redemptions Have Yet to Translate into Secondary Sales

Redemption requests have increased more than sixfold since 3Q25

Elevated redemption requests have not yet resulted in meaningful secondary market activity. (See Cox’s Press Release for $30m or 0.1% of BDC Persistent redemption pressure could therefore create additional secondary opportunities over time.

Default rates have remained relatively stable with historical norms

👉 Read Evercore’s Full Report

💰Fundraising News

Tikehau’s $6 billion European Direct Lending VI

Tikehau Capital, a Paris-based alternative asset manager, closed its $6 billion European Direct Lending VI. The strategy has already completed 30 transactions and realised four exits, generating double-digit returns, and is already 44% deployed. The portfolio has an average net debt to EBITDA of 3.5x.

👉 Tikehau’s Announcement

GoldenTree $2.75 bn Fund II

Goldentree, a New York-based manager, closed its $2.75 billion Private Credit Fund II. The Fund has already deployed close to 40% of commitments across approximately 50 investments and is delivering a net IRR of over 20%.

👉 GoldenTree’s Announcement

GCM Grosvenor $1.2 bn Credit Secondaries

GCM Grosvenor, a Chicago-based alt manager, closed its inaugural $1.2 billion Credit Secondaries Fund. The strategy focuses on opportunities across credit sub-strategies, with a particular focus on opportunistic corporate and asset-backed investments.

👉 GCM Grosvenor’s Announcement

NXT Capital $1.8 bn Capital Senior Loan Fund VIII

NXT Capital, a Chicago-based lender, announced a first close of $1.8 billion for its eighth direct lending fund. It finances sponsored middle market companies with earnings of $5 million to $50 million.

👉 NXT Capital Announcement

Dignari Capital Partners $500m from ADIA

Dignari Capital Partners, a Hong Kong private credit investment manager, raised $500 million from ADIA for its APAC real estate private credit strategy. The strategy invests in real estate opportunities in residential, office, retail, student accommodation, serviced apartment, co-living, data centers & logistics.

👉 Dignari Capital’s Announcement

Mercia $580 million UK Real Estate Development Debt Fund

Mercia Asset Management, a UK-listed, multi-asset investment manager, is raising up to $580 million for its UK Real Estate Development Debt Fund. The fund provides institutional investors with access to a specialist private credit strategy focused on UK industrial and logistics developments. The fund will finance experienced real estate developers with secured loans and will focus on opportunities within the industrial and logistics markets.

👉 Mercia’s Announcement

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

Reading on Outlook? The charts won’t render - Read it online

📕 Reads of the Week

Market Updates

Green shoots in the exit market

After three years of offloading assets below book value, Partners Group believes that sponsors are back to exiting companies at a premium to what remains in their portfolios. History suggests this is an early-cycle signal rather than a peak, the last two times the uplift turned positive, exit conditions improved for up to 7 years afterward.

👉Partners Group: 2026 Mid-Year

KKR: Base rates are driving fixed-income returns

KKR’s 5-year expected returns building blocks show that returns are predominantly driven by higher base rates, especially for Investment Grade exposures. KKR believes that investors should focus on high-grade credit, durable cash flows, and portfolio construction discipline, rather than reaching indiscriminately for yield or duration.

👉 KKR: An Expanded Toolkit for the Next Investing Regime

European direct lending had its weakest quarter in two years

Direct lenders funded twice as many buyouts as syndicated lenders by count. Direct lending spreads fell to 503 bps. Professional & Business Services displaced Technology as the biggest driver of new deal activity in the YTD.

👉 Pitchbook’s European Credit Monito

9fin’s European Private Credit Rankings

👉 S9fin’s European Rankings here

Hamilton Lane: The Rise of Opportunistic Credit. 👉 Read the paper

Manager Updates

Apollo is investing in Mexico

Apollo plans to deploy up to $20 billion in private credit opportunities in Mexico. It is reportedly in discussions over financing a range of infrastructure developments as well as other debt transactions. More here

👉 Coverage on Private Equity Wire

BCIs Investment Grade Fund.

British Columbia Investment launched its Investment Grade Private Credit Fund. The fund launched with $1.8 billion in direct co-investment commitments and a deployment target of $13 billion over three years. The fund includes investment-grade corporate credit and asset-backed financing, with a primary focus on North America and Europe. More here

👉 BCI’s Announcement

Partnership Updates

Nuveen x CalSTRS

Nuveen announced a strategic partnership with CalSTRS to invest up to $2 billion in sustainable infrastructure through Nuveen’s Energy Infrastructure Credit business. CalSTRS will serve as an anchor investor for the sustainable infrastructure portfolio in the Energy & Power Infrastructure strategy.

👉 Nuveen’s Announcement

Arrow Global in Italy

Arrow Global, a UK-based alternative manager specialising in private credit and real estate, announced the acquisition of Borio Mangiarotti, a leading Milan-based real estate development and management business. Founded in 1920, Borio Mangiarotti has played a significant role in shaping Milan’s urban landscape, with more than 500 completed buildings mainly across Lombardy.

👉 Arrow’s Announcement

Marsh: Private Credit is Insurers’ Defining Allocation Theme

Marsh surveyed 123 insurers around the world, representing over US$4 trillion in total investment assets.

Below are my key highlights.

👉 Read Mercer’s Full Report

More than half of insurers expect to increase private credit exposure over the next 12-24 months

This was a sharp contrast to their 2024 survey, when 37% of insurers reported plans to increase allocations to core fixed income, while just 32% intended to increase their allocation to investment-grade private debt

Private credit demand outstripped fixed income for the first time ever

Interest in private credit is even more pronounced at the larger end of the market, with 81% of insurers with more than US$25 billion in assets under management, planning to increase allocations to private credit compared.

Life insurers (73%) were more likely to allocate than Health (56%) and P&C (40%).

Despite the short liability profiles of Health/P&C players, private credit interest was robust and on par with public investment-grade fixed income.

North American insurers are more likely to allocate to IG Structured Credit (48% of US and 42% of Canadian insurers versus 33% and 23% for European and the UK, respectively), which is unsurprising given the maturity of structured finance markets and conducive regulatory regimes.

Insurers’ concerns about the asset class reflect a broader focus on where the market is in the credit cycle.

A reduction in the illiquidity premium and a weakening in credit discipline are the most prominent concerns, followed by fears of higher default rates.

The market opportunity remains attractive, but selectivity across manager selection and deal due diligence are of the utmost importance.

Beyond credit fundamentals, there is a second tier of concern around regulation, valuation, and the health of adjacent private equity markets. AI disruption seem to be viewed as longer-term issues, rather than immediate barriers to allocation.

👉 Read Mercer’s Full Report

🏃‍♂️Couch 2 Jon Gray

One of the unintended consequences of becoming a dad is that I’ve also acquired a dad bod.

So I’m fixing it.

I’ve started Couch to Jon Gray, the unofficial running club of private credit. The goal is simple. Get fit enough to keep up with Jon Gray.

If you're in private credit and looking for an excuse to run a little more consistently, join us. It doesn't matter whether you're training for your first 5K or your next marathon.

👉 Join Couch to Jon Gray on Strava →

Workouts don’t require creditor consent.

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💰Fundraising News

Sagard $1bn Credit Partners III.

Sagard, a Canadian alt manager, held a first close of $1 billion for its Sagard Credit Partners III. The fund lends senior loans to mid-market companies across Canada and the U.S., focusing primarily on non-sponsored companies. Since inception, Sagard Credit Partners has deployed over US$1.9 billion.

👉 Sagard’s Announcement

IPF $275m Fund IV

IPF, a European Healthcare Growth Debt provider, raised $275 million for its fourth fund. The fund focuses on senior and unitranche debt across European healthcare businesses. IPF typically lends between €10–25 million per company.

👉 IPF’s Announcement

Creation Capital $190m Listed Fund

Creation Capital, a South African investment firm, launched the Creation Yield Fund, a listed private credit vehicle targeting $190 million. The fund was listed on the Cape Town Stock Exchange on 15 July. It will invest in SMEs through non-bank financial lenders.

👉 Creation Capital’s Announcement

Tailwater Capital $170m Royalties Fund

Tailwater Capital, A Dallas-based Energy and Infrastructure manager, announced a final close of $170 million for its second Royalties Fund. The strategy acquires mineral and royalty interests across Tier 1 U.S. shale basins. Roughly half of the capital has been deployed across 30 Permian Basin transactions.

👉 Tailwater’s Announcement

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

Apollo: Don’t mistake the sprinkle for the cupcake.

You may question Apollo’s market sizing numbers, but its marketing is memorable.

👉 Learn how Apollo aims to lead with investment-grade private credit.

📕 Reads of the Week

Market Updates

• Ares on Real Estate

  • “For the first time in a while, mainstream commercial property looks ‘cheap’ on an income basis, relative to most other major asset classes.

  • Not every commercial building screams “bargain.” Yet at the portfolio level, prices have dropped far enough for investors to feel more confident about the risk/reward profile — particularly in sectors with stabilizing fundamentals and falling supply.

  • That distinction matters for those who worry about “trying to catch a falling knife.” In much of the market, the knife is just sticking up out of the floor, waiting for someone to get the handle.

  • 👉 Read the full report

• Avoiding SaaSpocalypse is an underwriting skill for lenders

  • Headline software exposure numbers are becoming less useful on their own.

  • Two private credit managers may report identical software allocations while holding radically different underlying risks depending on the durability of the businesses they finance.

  • 👉 Read more here

• Pimco estimates that $5 trillion in total AI-related capex is expected by 2030.

  • ~40% may need to be financed through debt markets.

  • Demand has been so strong that one lender described it as a “food fight.” 🍔

  • 👉 Learn more

• The weakening of maintenance covenants in private credit

  • An analysis of over 2,000 private credit agreements shows that more than a third of borrowers with maintenance covenants carry headroom exceeding 40%.

  • Not because they have deleveraged, but because covenants were set wide at origination to win mandates in a competitive deployment environment.

  • 👉 Read Allianz’s Fallen Angels report here

Manager Updates

• Mubadala is opening its private credit platform to external investors for the first time as it seeks to attract institutional capital.

  • Mubadala will transfer a $25 billion credit portfolio to Mubadala Capital, allowing the investment business to raise third-party funds alongside capital from its parent for the first time.

  • Mubadala will also commit an additional $4.65 billion to support the platform’s continued expansion.

  • 👉 More here

• HSBC pulls back from private credit. Link

• Temasek will double its private credit allocation by 2031

  • 👉 Read Temasek’s 2026 Strategy Review

2026 Private Credit Rankings

PERE’s Inaugural Credit 100

Infrastructure Investors’ Debt 30

Subscribe now

💰Fundraising News

• Arctos, a KKR-owned manager, closed its $6.2 billion Keystone Partners Fund I. The Keystone platform offers flexible, non-dilutive capital solutions for GPs across private markets and will target relationships with sponsors in North America and Europe. To date, more than 30% of the Fund’s capital has been deployed across 11 sponsors. This includes Keystone’s backing of Hayfin’s management buyout from British Columbia Investment Management Corporation. More here and here

• BlackRock held a first close of $1.7 billion for its European Middle Market Private Debt Fund II. The fund will finance European mid-market companies in defensive industries such as healthcare, business services, and software/technology. More here

• Santander Alternative Investments, the alternatives asset manager of Santander Bank, announced a first close of $170 million for its second Asset Backed Corporate Lending Fund. The fund provides asset-backed corporate financing to SMEs across Europe. The fund is targeting a total raise of €500 million, with a final closing scheduled for June 2027. More here

• Accession Capital Partners, a Poland-based manager, held a first close of ~$100 million for its first direct lending fund. ACP Credit will focus on high-growth small- and medium-sized companies in Central Europe. It will lend between €5-15 million per deal of senior-secured debt. The fund, which has a target of up to €200 million. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• Accredited Investor Insights: Blue Owl vs Oaktree - A Tale of Two Redemption Queues. Read here

• Sovereign funds move from public markets to private credit. Read the FT article

• Rithm Capital: Banks did not exit corporate lending. They repositioned inside it. Link

• Churchill: Mid-market fundamentals are sound. Focus on the fundamentals. Link

• Hamilton Lane: Private credit has consistently outperformed public credit

Direct lending capital is becoming more concentrated and increasingly centered among a smaller group of large, established platforms.

• 👉 Read Baring’s report on Direct Lending here

Manager Updates

• Why Apollo Created Their Onchain Credit Fund. Link

• Apollo: Increasing Transparency and Tradability in Private Credit. Read here

• Ares Alt Credit has over $57 Billion in AUM, with over $85 Billion deployed since inception and $12.7 Billion invested over the last twelve months alone.

  • 👉 Read more here

Partnership Updates

• Coller Capital and Cherry Bank announced a distribution partnership to provide Italian wealth investors access to private credit secondaries. Link

BDC Updates

“Show me the incentive, and I will show you the outcome.” The FT’s deep-dive into Thoma Bravo’s Medallia acquisition. Link

BDC’s Q2 Redemption Wrap Up

Q2 is largely behind us, and most of the largest non-traded BDCs have reported their redemption requests received. Below is a summary of the insights from the quarter.

The headline

• Investors asked to withdraw ~$24bn across the 15 funds we track (See below)

• Sponsors paid ~$8bn

• Aggregate requests rose sharply. Q1 2026 saw roughly $13.9bn requested across the NAV-BDC landscape, with about $7.4bn honored.

Requests were worst at the biggest funds

• Median requests were ~10% of NAV, but the asset-weighted average was 13.5%; pressure is concentrated in the largest vehicles.

• Cliffwater (17%), Blue Owl OCIC (18.8%), Apollo ADS (16.8%), and HPS HLEND (13.3%) received worse than average requests.

All managers capped redemptions

• Unlike Q1, all managers capped the redemption payouts 5%, calling it “operating as designed.”

The most-stressed funds eased

• Blue Owl OCIC (21.9%→18.8%),

• OTIC (40.7%→38.1%),

• Oaktree OSC (8.5%→4.5%)

Brookfield: Seeking Resilience in Turbulent Times

Brookfield published its quarterly outlook to explain how investors can navigate private credit during this market volatility. Below are the key takeaways.

👉 Read Brookfield’s Full Report Here

Non-Accruals in BDCs Remain Low

• Private credit sentiment has shifted from enthusiasm to caution.

• The current market is a consequence of company-specific issues and underwriting standards, not a fundamental break in the system.

• This explains why the dispersion of returns is increasing across lenders, sectors, and vintages.

While PIK Usage Is a Concern, Levels Are Stabilizing, and Non-Accrual Rates Remain Low

• While PIK activity, particularly PIK introduced through amendments, can be a sign of credit deterioration, usage has stabilized recently as borrowers’ ability to pay cash interest is improving.

• Market stress has been more pronounced among smaller and middle-market borrowers, particularly companies in the $25–50 million EBITDA range, while larger issuers have generally remained more stable.

Direct Lending Spreads Remain Attractive

• One of the inevitable consequences of a market dislocation is that it creates opportunities in distressed assets, and this is no exception.

• This is particularly evident in sector-specific areas that have borne the brunt of negative sentiment, but is also a result of refinancing pressure.

• More than $1.3 trillion in loans are maturing in 2026; public markets are likely to absorb much of this volume, but may be less receptive to more complex credit situations, creating opportunities for private lenders

There are four key themes driving the private credit outlook over the next few months

1. Dispersion is key. There will be increased dispersion among private credit manager returns. To put it simply, this is a credit pickers’ market.

2. Yields remain attractive. The private credit premium—in other words, the return relative to public credit investments—has compressed in recent months, but it has not disappeared. Yields remain compelling relative to public markets.

3. Selection-driven returns. Performance will increasingly depend on a strong focus on borrower quality, underwriting discipline, and the structuring and sourcing of loans. Direct lending is and remains a core allocation of investors’ fixed-income portfolios, but sustained performance will come from lenders that emphasize selectivity and disciplined underwriting, with a focus on risk mitigation.

4. Opportunities are emerging. One of the inevitable consequences of a market dislocation is that it creates opportunities in distressed assets, and this is no exception. This is particularly evident in sector-specific areas that have borne the brunt of negative sentiment, but is also a result of refinancing pressure. More than $1.3 trillion in loans are maturing in 2026; public markets are likely to absorb much of this volume, but may be less receptive to more complex credit situations, creating opportunities for private lender.

👉 Read Brookfield’s Full Report Here

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💰Fundraising News

• Hayfin, a UK-based manager, closed its $17.2 billion Direct Lending Fund V. The fund lends senior‑secured loans to European middle‑market and upper‑middle‑market businesses. Since it was founded in 2009, Hayfin has invested over €55bn of capital across more than 500 portfolio companies via its private credit strategies. More here

• Ares is raising its second Asia private credit fund focused on financing leveraged buyouts across the Asia Pacific. The fund, Asia Direct Lending II, could reportedly be larger than its predecessor, which raised $1.7bn, although final details have not yet been set. More here

• RGreen Invest, a Paris-based manager, closed its $572 million Infrabridge IV fund, more than doubling the size of its previous vintage. The infrastructure debt fund provides short-term senior debt/bridge financing to energy-transition infrastructure projects in Europe, focusing on the lower-mid market. Its portfolio spans a broad range of sectors, including geothermal energy, biomethane, energy storage, hybrid solar and wind projects incorporating battery storage. More here

• Incus Capital, the Madrid-based real assets private credit specialist, announced a second close of $640 million for its European Credit Fund V. The fund provides asset-backed financing to mid-market businesses across Europe. Investments completed to date include financing for prime residential development projects, logistics assets, the hospitality industry, energy transition infrastructure, and residential repositioning opportunities. The fund typically lends between €25 million and €60 million per company. More here

• Eiffel Investment, a Paris-based manager, announced the first closing of $570 million for its Impact Debt III. The fund provides financing to European mid-sized companies, where the capital is used to support one of three impact objectives: reducing temperature impact, preserving ecosystems, or promoting diversity. It will invest in 40 to 50 European companies. More here

• Orbit Capital, a Czech Republic-based manager, announced a second close of $122 million for its second Growth Debt Fund II. Orbit Capital is a growth-stage investor managing over €200 million in AUM through venture debt and growth equity vehicles. The firm has a primary focus on technology leaders in CEE, while remaining actively engaged in opportunities across the DACH region and broader European markets. Tickets range from €3 million to €15 million. More here

• TLG Capital, a London-based emerging markets manager, announced the $120 million second close of its Africa Growth Impact Fund II. The fund finances African SMEs through local banking partners, with each loan structured for a longer tenor than African banks typically provide and backed by a guarantee from the originating bank. Since its $75 million first close in April 2025, the fund has invested in nine SMEs across seven countries and seven sectors, with debt facilities ranging from $5 million to $15 million. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

That line from Ares’ Alternative Credit is one I often think about when writing these quarterly pieces.

It’s easy to get pulled into media narratives, anecdotes, individual portfolio workouts, or whatever controversy is dominating the week. Taken together, they often leave us with a distorted view of the overall market.

So once a quarter, I try to step back and look through the telescope: where is capital really flowing?

That means analysing every fundraising announcement I’ve tracked during the quarter. The dataset is not perfect, but it is good enough to reveal the bigger picture. If you think the conclusions are wrong, I’d be happy to be challenged.

Redemptions have dominated the conversation for the past six months

It feels like everyone has been so focused on redemptions that we forgot the other side of the equation, fundraising.

Private credit managers raised $262 billion in H1, 30% more than last year. That was not the outcome I expected given how poor Q1 was. The growth was entirely driven by Q2, when managers raised $173 billion, accounting for nearly 70% of H1 fundraising.

Stepping back, several recurring themes continue to stand out:

• Fewer funds are raising in the market.

• The largest managers are taking most of the capital.

• Credit secondaries set all time highs.

• Asia continues to outperform.

But there were also a few surprises:

• Fund sizes are getting larger.

• Direct lending is back.

• Europe is declining.

Let’s look at each of these in more detail.

Capital is concentrating at the top.

👉 This continues to be one of the most important takeaways

The average size of the top 5 funds has grown every year for the last 3 years.

• $10.6bn (2024)

• $11.0bn (2025)

• $14.3bn (2026).

Despite all the redemption noise, mega-managers are raising larger funds than ever before. More strikingly, there were three times as many funds above $10bn as there were last year.

At the other end of the market, smaller funds are struggling. The number of sub-$1bn fundraises fell 40% year-on-year, and the capital raised by those funds declined 30%.

This is best shown in the graph below. Capital concentration has reached the highest level I’ve recorded. In short, LPs are focusing on the largest managers.

To understand why capital is concentrating around the largest managers, it’s worth listening to Alan Waxman on Invest Like the Best and reading WTF Is Going On In Private Credit? Both help explain the rise of the factory model.

The Top 10 Funds Raised 60% of the Capital…

1. Barings’ $19 billion Global Direct Lending Strategy

2. Ares’ $12.7 billion Pathfinder Asset-Based Finance Strategy

3. Crescent Capital’s $10.8 billion Fourth U.S. Direct Lending Fund

4. Blackstone’s $10 billion Capital Opportunities Fund V

5. Ares’ $9.8 billion Special Opportunities Fund III

6. Antares Capital’s $8.5 billion Senior Loan Fund III

7. Guggenheim’s $8.4 billion Private Debt Fund IV

8. 17Capital’s $7.5 billion Credit Fund 2

9. Adams Street’s $7.5 billion Private Credit III

10. Apollo’s $6.5 billion Hybrid Value Fund III

The US took a record share of capital

North American funds raised 61% of the capital in H1 2026, up from 52% a year ago and reaching the highest market share I have ever recorded. The concentration was mainly driven by the mega-managers.

European fundraising, meanwhile, fell 35% YoY, a massive retreat for a region that has been a steady third of the market.

Asia continued to outperform, with 12 funds raising $7.5 billion in H1. This was a 5x increase in 2025. The clearest sign of this momentum is fund size: KKR, RRJ, and Varde each raised Asian vehicles of more than $1bn.

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📕Nick’s Top Articles for Q2

1. Diameter: WTF Is Going On In Private Credit?

2. The State of Private Credit in Q1 26

3. Sixth Street: The Rise of the Factory Model

4. Milken: Private Credit’s Dispersion Has Been Abnormally Compressed

5. Sona’s Honest Assessment of Private Credit

Institutional Investors are Coming Back to Direct Lending

This was the second biggest insight of the quarter: Direct lending is still very much alive. Five of the top 10 funds were direct lending vehicles. Yes, the number of direct lending fundraises fell 35% year-on-year, but the funds that did close were twice as large on average.

Opportunistic credit remains one of the clearest growth areas, with fundraising doubling year-on-year. While many strategies saw fewer funds close, the number of opportunistic fundraises rose for the third year running.

For more on this trend, see Dispersion Is Back

Credit secondaries volume has set new highs every year since 2020. Credit secondaries fundraising is up 6 x year-on-year, with Ares $7 billion raise leading the way.

For more on this trend, see Solving Private Credit’s DPI Problem.

🏆 Nick’s Funds of the Quarter

• Barings $19 billion Global Direct Lending Fund

It was only two years ago that Barings lost a meaningful portion of its team to Nomura. They’ve now managed to raise the largest fund I’ve recorded in 2026, despite this setback and despite being a direct lending fund.

• Stepstone’s $3.1 billion Structured Solutions Vehicle

Secondaries are going to reshape the private credit landscape over the next five years, and I expect Stepstone to play a key part in this.

• Crescent Cove $446 million Fund IV

While the “SaaS apocalypse” took most of the media attention, Crescent Cove showed that specialist managers can still raise capital in less obvious corners of the market.

Crescent Cove lends to high-growth technology businesses, including businesses operating in defense tech, autonomous driving, AI infrastructure, and cybersecurity.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Manager Updates

• Recommended Read: Cliffwater Corporate Lending Fund: The Machine Slows Down. [Read here] - Message me if you’re not a subscriber and I’ll gift you access.

• GIC is divesting $2 billion of private credit holdings. GIC has previously sold down its legacy fund interests, including exposure to managers such as Blackstone Inc. and Apollo Global Management, as part of its broader portfolio management activities. Evercore has reportedly been appointed to advise on the transaction. [Read here]

• Canyon Partners, a Dallas-based manager, launched Canyon ABF Partners. The joint venture is anchored by Daiichi Life Insurance and Korea Investment Holdings, which will provide a permanent balance sheet capital designed to facilitate $5+ billion of annual origination capacity. [Read here]

• Brookfield provides Papa John’s with $725 million of preferred equity. The deal has an all-in yield of 12%, with 10% PIK and 2% cash. The preferred equity also includes a minimum multiple on invested capital of 1.6x. [Read here]

Market Updates

• Much Ado About Nothing

  • You may have seen some noise about this Columbia study on private credit.

  • The paper’s key conclusions were:

    • Private-letter ratings systematically understate investment risk.

    • U.S Insurers would need to hold about $4.5 billion more capital if the ratings were aligned with the perceived impairment risk.

  • KBRA published its thoughts on the piece:

    • $4 billion is only 0.5% of the U.S. life insurance industry’s capital.

    • Non-investment grade only accounts for 10% of the total private letter rating portfolio. Why did the Columbia study apply the same extrapolations across the whole book?

• A reminder that private credit’s scale comes with strings attached. The Australian Securities and Investments Commission has officially put private credit managers on notice. Link

• Gemcorp’s Emerging Market Survey: Key Numbers at a Glance. (Link)

BDC’s Q2 Redemptions: Week 3

Oaktree’s Strategic Credit fund was the only addition this week, receiving redemptions of 4.5%. For context, this was nearly half of Q1’s redemption requests of 8.5%.

Oaktree met the full redemption.

Software and AI Updates

• GPU Rental Rates are Rising

• More than half of managers surveyed by LCD have reduced their exposure to software borrowers as a result of AI disruption risk.

• Software’s share of buyout activity continues to fall

KKR’s Divergence Conundrum

The Divergence Conundrum is an investing landscape where certain segments of the economy and markets are starved for capital, while others are flush with attractive financing options.

Where Is Relative Value Most Attractive Today in Credit?

• The biggest shift in credit this year has not been spreads.

• It has been dispersion driven by software-related credit concerns and redemption pressures in select areas of the private credit market.

• The market has become less willing to reward aggressive underwriting, elevated leverage, and concentrated risk.

There are higher levels of defaults and lower levels of recoveries.

• Defaults, including PIK and extensions, have been running around five percent since August 2024.

• The corporate direct lending market will consolidate the same way that the liquid credit markets did in prior decades

Private Credit is in a period of price discovery.

• Spreads continue to widen,

• Original issue discount levels have increased,

• Lenders are increasingly able to secure tighter structures and stronger covenants.

• This creates a better entry point for new capital deployment.

Signals are important.

• Structure, collateral, documentation, and sponsor behavior are increasingly becoming the real drivers of outcomes in credit.

• Reaching for incremental yield is not rewarded.

• Stay selective and focus on situations where expected returns are attractive relative to volatility, leverage, and potential loss.

There is growing gap between strong and weak credits.

• Asset-Based Finance remains attractive given its diversified collateral pools, contractual cash flows, and expanding opportunity set as assets continue to migrate away from bank balance sheets.

• Capital Solutions unlock value for businesses where customized financing structures providing meaningful risk mitigation and equity upside.

• This is particularly relevant where IPO and M&A activity remains uneven and sponsor exit timelines have been extended.

Private Credit is increasingly moving towards bifurcation.

The distinction will not just be between good and bad credits, but between well-constructed and poorly constructed portfolios

👉 Read KKR’s Full Report Here

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💰Fundraising News

Trimontium, a London-based manager, announced its launch with $1.5 billion in assets under management. The opportunistic strategy will invest across corporate capital (across debt, hybrid, and equity), special situations, structured and asset-backed credit, and uncorrelated asset classes, including IP rights and royalties. It can invest in both European and North American markets. More here

Altavair, a US aviation lessor, raised $1.4 billion from KKR. The investment will primarily come from KKR’s Infrastructure and Asset-Based Finance strategies. KKR has committed more than $8 billion with Altavair since 2018. Over that time, they have acquired 188 commercial aircraft and engine assets through a variety of transactions, including lessor trades, airline-direct new and used sale leasebacks, passenger-to-freight conversions, and structured transactions. More here

Blackstone Credit & Insurance launched SablePointe, a platform supporting origination, underwriting, and portfolio management in asset-based lending. SablePointe will support BXCI as it sources, structures, and manages senior secured asset-based and first-out credit facilities for corporate borrowers. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Top 3 Market Updates

1. US Direct lending volume fell to a three-year low. Pitchbook

   

2. Global Technology buyout deal value has also fallen sharply. Bain & Company

   

3. Despite this, deals priced between 450-499bps represent more than half of YTD activity. Blackrock

Manager Updates

• Ares raised $12.7 billion for its Pathfinder Fund III, the largest global asset-based finance fund in the market. Ares Alternative Credit now manages ~$57.3 billion, including $33.1 billion dedicated to non-investment grade assets. More here

Apollo and Blackstone announced a $35 bilion package to finance Broadcom’s new AI XPV Platform. The financing will enable over 20GW in compute capacity for leading frontier AI labs through 2028. The initial transaction will facilitate Anthropic’s previously announced capacity expansion of more than 1GW of compute infrastructure for training and inference starting in mid-2026. Link

Partnership Updates

• Janus Henderson is acquiring Rantum Capital, a Frankfurt‑based private markets investment manager. Founded in 2013, Rantum Capital focuses on providing private debt and private equity financing solutions to family and entrepreneur‑owned small and mid‑sized companies in Germany, Austria and Switzerland. The firm has raised around €1.2 billion of capital across its private credit and private equity strategies. Link

This acquisition builds on Janus Henderson’s recent expansion in private markets, they also acquired NBK Capital in the Middle East and Victory Park in the US in 2024.

BDC’s Q2 Redemptions: Week 2

4 BDC’s announced redemption requests last week: HLEND, TPG, BDEBT, and HPS Corporate Capital Solutions.

HPS’s $26 billion HLEND generated much of the attention, and as expected, capped its 13.3% of redemption requests at 5%.

Below is a summary of Q2 so far.

Credit Secondaries: Solving Private Credit’s DPI Problem

The 2019 Vintage Is Running Out of Road

• Ares believes that 2019 vintage private credit funds have an average DPI multiple of ~0.7x.

• These funds only have a few years to convert a meaningful share of NAV into distributions.

Credit secondaries are one of the fastest-growing segments of private markets.

• Beginning in the early 2020s, and accelerating meaningfully through 2022 and 2023. Apollo

Despite this growth, credit secondaries remain a fraction of the overall direct lending market.

• Carlyle estimates that only $20 billion of credit fund exposures traded in 2025.

• This impliying a fund turnover rate (Secondaries Market / Direct Lending Market) of ~1%.

• This is well below the 2–3% observed in private equity secondaries. Carlyle

This gap highlights the headroom for growth

• Apollo expects the private credit secondaries market to scale from $20 billion in 2025 to $50 billion within two to three years.

• Carlyle believes the credit secondaries market will grow to $80+ billion by 2030, comprised of ~$55 billion in GP- centered volume, which is experiencing the most significant growth, and ~$25 billion in LP-centered volume.

GP solutions are experiencing the most growth

• Unlike private equity continuation vehicles, where one or a small number of assets are typically selected, credit continuation vehicles are generally structured as full-fund solutions, with diversification as a core feature.

• Alignment is typically stronger than in LP interest transactions since the new vehicle is supported by GP carry rollover, additional GP capital commitments, and refreshed governance frameworks, such as enhanced reporting, Limited Partner Advisory Committee (“LPAC”) rights, tighter structural safeguards, and tailored downside mitigation features.

• For buyers, continuation vehicles offer the opportunity to deploy capital into seasoned portfolios with known performance characteristics. Buyers can benefit from full access to GP deal teams and detailed asset-level information, including underwriting memoranda, financial models, portfolio reviews, and valuation materials.

Pricing is one of the most easily misconstrued elements of the market

• Credit secondaries priced at 92% of NAV on average in H1 2025, up from 91% at the end of 2024.

• Strong pricing was fueled by significant fundraising dedicated to private credit and strong demand for senior direct lending interests. Jefferies

Beware of Discrete Discounts

Credit secondaries sources that have participated in or worked on the half-dozen mega-continuation vehicles in the market gave LCD generalized but realistic figures to illustrate how these processes usually work.

For example, a deal that prices nominally above par — for example, 102 — may get three points of discount from the portfolio’s NAV (which may be marked at 97) and another four points from the two quarters of post-reference date cash flows that have accrued to the buyers’ benefit. This brings the indirect discount to a total of seven points, and an effective price of 95, on a deal that may have a headline price of 102.

This is why no deals have traded at a “true premium” to par, a number of sources said. One banker estimated that the highest effective price seen in the market so far has been par, at most. Pitchbook

👉 Read More: Carlyle, Apollo, Coller Capital, Ares, Jefferies, Pitchbook

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💰Fundraising News

Ares raised $12.7 billion for its Pathfinder Fund III, the largest global asset-based finance fund in the market. Ares Alternative Credit now manages ~$57.3 billion, including $33.1 billion dedicated to non-investment grade assets. More here

The Pathfinder family of funds have pledged to donate at least 5-10% of the carried interest profits from to global health and education charitable organisations. Based on performance to date, the Pathfinder funds have already accrued approximately $56.9 million in pledged charitable contributions. Read more about Promote Giving here

Hunter Point Capital, a New York-based manager, closed its inaugural vintages of its NAV Lending and Preferred Solutions strategies, with total commitments of $4.3 billion. The GP Financing Solutions platform offers NAV-based loans and preferred financing solutions to investment managers. To date, it has completed 13 transactions. More here

Man Group, a UK-based manager, announced a first close of its Man Opportunistic Credit Fund III. The fund is targeting a final close of $1.25 billion. The strategy focuses primarily on mid-market, off-the-run and other less competitive opportunities, combining steady-return asset pools with direct-to-company financings and bespoke transactions. More here

KKR has had a first close of $1 billion for its Opportunistic Real Estate Credit Fund III. The fund will invest opportunistically in real estate in the US and Western Europe. The fund will focus on experienced sponsor and will also invest in mezzanine loans, preferred equity and single-asset, single-borrower deals. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• Mercer’s Guide to GP-Led Continuation Vehicle Terms:

  • Management fees typically range between 0.75-1.00%. This hasn’t changed over the past five years.

  • Nearly all vehicles used tiered carry structures with an average of nearly 3 tiers and a maximum carry of 20%,

  • GPs commit between 6% and 10%.

  • Watch out for the deferred payments…

  • Learn more here

• 17Capital: NAV loans uncovered. Link

• Ares: A Comprehensive Guide to Private Infrastructure. Link

• Ares: Public Market Valuations Overtake Private Markets. Link

Manager Updates

• Fasanara Capital launched its Ferrari Lending Platform. The platform is a partnership with Mattioli Automotive Group and will allow Fasanara to originate and manage loans secured by Ferrari cars. Link

Partnership Updates

• Blackstone signed a new private credit partnership with Nippon Life, one of Japan’s largest insurers. As part of the agreement, Nippon expects to allocate at least $9.4 billion to Blackstone’s private credit and structured credit strategies over the next five years. More here

Your chance to buy alleged MFS fraudster Paresh Raja’s Ferrari.

European Prestige UK Limited, a dealer in “luxurious, high-performance and limited-production vehicles”, is the lucky buyer of Raja’s 8 supercars. Readers interested in owning a piece of financial scandal history will doubtless be hitting refresh on the listings on their website. (Source FT:here)

BDC Redemption Season is Back

If you missed Season 1 of BDC redemptions, here’s a recap of what happened in Q1:

• Non-traded BDC redemption requests averaged ~10%.

• Most managers capped payouts at 5%.

• Blackstone and Oaktree decided to meet the full redemption requests.

BDCs Q2 Updates: Week 1

Last week saw the first wave of redemption announcements:

• Redemption requests have increased for all managers so far.

• Cliffwater’s redemption requests increased 20% QoQ.

• All managers have decided to cap at 5%.

Season 2 Spoilers

• Redemption requests will likely increase for all managers.

• Most managers will cap at 5%.

• Expect some fairly dramatic headlines.

So before your uncle forwards you an article asking if everything is okay, here are a few points worth keeping in mind.

The gates exist for a reason

• Before non-traded BDCs existed, investors could either have daily liquidity in a traded BDC or illiquidity in a 10-12 year private commingled fund.

• The innovation of non-traded BDCs was to allow investors to own illiquid assets while providing a structured path to liquidity, with the structure self-amortizing so investors could be made whole without forced asset liquidations.

• The 5%/20% limits weren’t pulled out of thin air but rather designed to track the weighted average life of the underlying loan portfolio.

• Meeting the contractual 5%/20% is exactly what these structures were designed to do.

• See Three Misunderstood Facts about BDCs.

We’ve Seen This Redemption Playbook Before

• It’s helpful to look back at history and understand how managers worked through similar instances when they were oversubscribed.

• Blackstone’s Real Estate Income Trust (BREIT) is one fund that faced a period of heightened redemption requests where investors asked to withdraw roughly 20% of shares at the peak (Exhibit 1). The fund ultimately fulfilled 100% of requests over a fourteen-month period.

• Assuming redemptions spike two to four times their quarterly limit in Q1 2026, iCapital estimates oversubscriptions could continue for a three to five quarter period.

See iCapital’s analysis.

Not all BDCs are equal

• Much of the media hype focuses on BDCs as a whole.

• However, as Neuberger highlighted,BDCs Have Shown Wide Performance Dispersion .

Lending money isn’t hard. Getting repaid can be hard. The managers who understood that during the very good times are the ones who will stand out now in this less certain environment.

TCW: Looking Beyond Cockroaches and Canaries

It’s the boulders NOT the pebbles.

• Focus has been on HNW investors.

• In reality, the redemptions are largely driven by a few larger family offices or single institutions (See Vista Credit).

• 90% of investors are choosing to remain invested.

Non-Traded BDCs ≠ All Private Credit

• Attention will be focused on the non-traded BDCs.

• As Apollo and others have pointed out, the market is much larger than this.

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Morgan Stanley: Private Credit Still an All-Weather Asset Class?

Morgan Stanley released a white paper on US and European Direct Lending. Below are a few graphs which might be helpful in your fundraising decks.

Europe Overtakes the US on Direct Lending Premiums

• Over the past three years, European direct lending has delivered an average premium of ~240 bps.

• Europe saw an increase in illiquidity premium from ~180 bps in 2023 to ~260 bps in 2025.

• In the US, the premium has compressed from ~270 bps in 2023 to ~180 bps in 2025.

Software Valuations have Normalised

• Software accounts for ~20-30% of Direct Lending

• Valuation multiples exceeded ~30x EV/EBITDA at their 2021 peak.

• They have since normalised significantly.

• Listed software companies continue to deliver revenue growth of approximately 10–15% with forward expectations of 10–11% p.a. for the next two years.

Direct lending benefited from a “golden age” of higher base rates

As policy rates have declined and spreads have compressed from peak levels, headline returns have moderated accordingly.

More recently, wider public credit spreads and the reset in public software valuations may have created an impression that private credit software assets may be susceptible to future markdowns. .

👉 Read the full report here

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💰Fundraising News

• Crescent Capital Group, a Los Angeles-based credit manager, raised $10.8 billion for its fourth U.S. direct lending fund, the largest fund in the firm’s history. The fund invests in sponsored lower middle market companies across the United States, targeting companies with EBITDA ranging from $5 million to $50 million. More here

• Eurazeo, a Paris-based asset manager, closed its $4.5 billion Private Debt VII fund. The firm’s flagship direct lending strategy focuses on financing lower mid-market companies across Europe and is already 65 percent deployed across more than 70 portfolio companies, totalling €2.5 billion in investments. More here

• HSBC Asset Management closed its $2 billion UK direct lending fund II. The strategy invests alongside HSBC’s bank in senior secured loans to lower- and core-middle-market businesses. It typically lends at 3-4x leverage with robust maintenance covenants and equity cushions of c.70%. More here

• PGIM, a Newark-based global asset manager and the investment arm of Prudential Financial, launched the PGIM Global Private Credit Fund SCA, a Luxembourg-domiciled fund targeting wealth investors in the United Kingdom, continental Europe and Asia. The fund invests in senior secured loans to middle market companies across North America, Europe and Australia, focusing on companies with EBITDA of $10 million to $75 million. More here

Didn’t make the cut

Software Deal Activity Was Elevated in the 2020-2022 Vintage. Link

https://www.connectmoney.com/stories/nav-reits-bdcs-have-returned-over-82b-to-investors-since-22/

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• Chicago Fed: Private equity-backed life insurers are fueling private credit.

  • While life insurers have long provided this form of private credit, private placements lending increased from $386 billion in 2014 to $849 billion in 2024.

  • In relative terms, private placements accounted for 14 percent of life insurers’ general account assets in 2024, up from 10 percent in 2014

  • Life Insurance PE-owned life insurers more than doubled their annuity market share from 8.5% to 18% and their indexed annuity market share from 16% to 33%.

  • 👉 Download the full report

• PGIM: Headlines vs. Health. Link

• Carlyle: Q2 Global Private Markets Quarterly. Link

• PWC: Private Credit Survey. Link

How much do you expect your allocation to private credit to change?

What IRR are you targeting on an unlevered basis?

👉 Read PWC’s Survey here

Data Centers and AI

• Apollo and Blackstone are structuring a $36 billion package financing AI for Anthropic, in one of the largest transactions of its kind:

  • The financing is designed to enable Anthropic to acquire Google’s tensor processing units (TPUs), which will then be leased back to the Anthropic for use across its expanding compute footprint.

  • Broadcom is expected to provide a form of residual value guarantee on the underlying hardware.

  • The financing will be divided into multiple tranches with Apollo and Blackstone syndicating portions of the debt to other institutional investors while retaining meaningful stakes themselves.

  • More here

• Blue Owl: Inside a Data Center. Link

• Brookfield: Opportunity in a constrained market. Link

• PIMCO: A-rated and higher hyperscalers have plenty of debt capacity. Link

  

BDC Updates

• BDCs with higher SaaS exposure have underperformed their peers. Link

Partnership Updates

• TD Bank, the 10th-largest commercial bank in the US by assets, is looking to partner with private credit managers. Link

• Investec, the UK-based bank, and Sequoia Investment Management Company, a global private credit manager dedicated to infrastructure, partnered to finance UK and European energy and infrastructure. Link

Restructuring

• Ares and MetLife disagree over the restructuring of Eagle Football debt. Link

• Blackstone and KKR to assume control of the dental group Affordable Care. Affordable Care was valued at $2.7bn when Harvest Partners acquired its stake in 2021. Link

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Partners Group: Separating Headlines from Reality

Private Credit Headlines Have Surged

While headlines warrant attention, they often overstate the near-term implications and underappreciate the underlying resilience in both current fundamentals and the macro backdrop.

Coverage Ratios Show Resilient Fundamentals

Interest coverage ratios have improved from mid-2024 lows, supported by lower policy rates and healthy EBITDA growth. Sub 1.0x borrowers have declined materially, falling to 14% in Q4 2025 from 21-23% throughout 2023 and early 2024.

Not All Software Is Equal

Incumbents with strong moats, proprietary data, AI-enabled workflows, and exposure to regulated or mission-critical end markets are better positioned to sustain value and drive efficiency gains. These are typically found in infrastructure and vertical application software.

By contrast, more vulnerable software tends to be rules-based, repetitive, and often tied to functions like customer service or project management. This exposure largely sits within horizontal application software, which accounts for around 35% of total software exposure within the U.S. direct lending market.

This real at-risk exposure is just 7%, well below the 20% headline figure.

Q1 Redemptions were five times above the prior four-quarter average

Redemption caps are a feature, not a flaw.

Most vehicles can meet redemptions at stated limits for at least the next 4-5 quarters, supported by multiple levers, including loan turnover of around 25-30% annually, liquidity sleeves of 10-15% in cash and liquid credit, and access to debt and bank credit lines.

The more important story is one of transition.

For much of the past decade, the dominant strategy was straightforward: build a diversified portfolio, apply leverage, and collect spread. That approach worked well in a benign default environment.

Partners Group thinks this will be harder to replicate going forward:

Private credit is now entering a new normal defined by greater bifurcation and wider dispersion of returns.

In a more differentiated market, selectivity becomes the primary driver of returns.

It is against this backdrop that we assess the current private credit fundamentals, separate headlines from reality, and offer a path forward for earning returns in private credit.

As an example:

Two thirds of managers have less than 10 years experience

With nearly half of direct lending managers formed post-COVID and close to 70% established within the past decade, many have yet to be tested through a full cycle – suggesting differentiation across managers is likely to increase further.

👉 Read the full report here

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💰Fundraising News

• Bridgepoint, the London-based manager, is closing its $5.8 billion European direct lending fund IV. The fund finances sponsored European middle-market businesses. The fund is nearly 50% larger than its predecessor fund, which closed at €3.4 billion. Link

• Pemberton, a London-based private credit manager, closed its $4 billion Strategic Capital IV fund. Launched in 2017, the opportunistic strategy invests in performing companies across Europe. More here

• Oaktree partnered with Pantheon to scale its European Direct Lending with a target to deploy up to $1.2 billion. Pantheon will provide additional capital alongside Oaktree’s existing portfolio of seeded investments, supporting a strategy focused on senior secured, first-lien loans to corporates across Europe and the UK. More here

• AHL Ventures, a Kenyan-based manager, announced a first close of $30.5 million for its debut institutional credit fund. The fund lends to African businesses, with a focus on financial inclusion, climate-related businesses, and agriculture. It can invest across the capital, providing senior secured, mezzanine and bridge loans. AHL continues to raise additional capital toward a targeted final close in Q1 2027. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

AI and Data Centers

• Pimco: AI Credit Expansion: Assessing the Micro and Macro Risks (**Recommended Read**).

  • 👉 Read The Full Report Here

• Blackstone is partnering with Google to create a new U.S.-based company that will offer efficient data center capacity, operations, networking, and a compute-as-a-service. Blackstone will initially commit $5 billion to ensure the first 500 MW of capacity goes online in 2027. More here

Market Updates

• Private credit spreads in the spotlight.

  • Spreads in the US have widened by 50-100 bps since the start of the year, placing typical deal pricing around 525 bps.

  • The European market has barely moved. The average European direct lending spread for the last 12 months is 509 bps, 13 bps lower the full-year 2025 reading.

  • 👉 Read Pitchbook’s Analysis Here

• Pitchbook’s Global Private Market Fundraising Report. Link

• Bank lending to UK businesses fell to the lowest level in nearly 30 years.

  • Total lending to private businesses returned to levels last seen in 1998

  • SME loans have almost halved as a % of GDP since 2011.

  • See the FT Article here and BCG Research here

• KKR: 2021 and 2022 Vintages Reflect Weaker Underwriting; Other Vintages Are Better Positioned. Link

Partnership Updates

Citi and HPS announced a €15 billion Private Capital Program. The Program will finance €15 billion of sub-investment grade debt opportunities in EMEA over the next five years. Citi will source businesses based in Continental Europe, the UK, and eventually the Middle East. More here

Manager Updates

• Abry Private Debt acquired a $330 million private credit portfolio with Coller Capital. The portfolio is primarily senior secured loans across a variety of industries, including commercial and professional services, healthcare, and consumer discretionary. All underlying investments are backed by established sponsors. Abry will assume an active management role, working directly with sponsors, lenders, and management teams throughout its hold period. More here

• Switzerland’s public sector pension fund Publica is preparing to allocate up to $1.1bn into private credit. The fund is looking for external managers for two separate direct lending mandates: one focused on Europe, worth up to €500 million, and another targeting the US market for up to $550 million. More here

• Federal prosecutors are reportedly examining valuation practices at BlackRock TCP Capital Corp (TCPC). TCPC disclosed an unusual off-cycle update in January, warning that it expected to reduce the value of its portfolio by about 19%. The announcement triggered a sharp share price drop and was followed by multiple class-action lawsuits from investors alleging misleading disclosures and improper valuation of loan assets. Link

Bank SRTs

• MUFG is exploring an SRT tied to $2 billion of credit exposure to private credit funds. The deal would shift potential losses on BDC credit lines to institutional investors, while MUFG keeps the underlying loans on its balance sheet. More here

• JPMorgan is reportedly exploring, and SRT tied $4 billion of NAV loans spanning across North America, Europe, and the Middle East. Investors are expected to receive low-teens returns in exchange for absorbing first-loss exposure. More here

Diameter: WTF Is Going On In Private Credit?

Diameter published a 59 page deck summarising the state of private credit and where it sees opportunities. I’d recommend you read the whole report, below are a few of my favourites

👉 Read the full deck

Fees on private credit vehicles have exceeded those of traded credit

Public alternatives managers leaned into AUM and FRE growth; Private Credit became their engine

Private Credit M&A expanded amid FRE multiple expansion

• HPS was acquired for ~30x forward FRE in July 2025

Industrial-scale origination and deployment drove PC platforms’ enterprise value

This has many overlaps with to Sixth Street’s recent “factory model” piece.

Where do Diameter opportunities?

👉 Read the full report here (Page 50+ for opportunities).

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💰Fundraising News

Direct Lending

• Barings raised $19 billion for its latest global direct lending vintage. The strategy focuses on upper-middle-market borrowers with roughly $15m–75m EBITDA across North America and Europe.

• Antares Capital, a Chicago-based alternative credit manager, raised $8.5 billion for its third Senior Loan Fund. The fund invests in senior secured loans across U.S. and Canadian borrowers. More here

• Stellus Capital Management, a Houston-based direct lender, closed its $1.5 billion Stellus Credit Fund IV. The fund provides senior secured loans to sponsored businesses in the United States and Canada. It has already invested in 44 portfolio companies. More here

Asia

• Värde Partners launched its $1 billion Asia-focused private debt fund. The fund will invest across India, Australia, and Southeast Asia. The vehicle marks Varde's first Asia fund exclusively focused on private credit. More here and here

• ASK Alternates, a Mumbai-based private credit manager backed by Blackstone, launched its second private credit fund with a ~$250 million target. The fund will invest in senior secured lending to high-quality Indian businesses. It will target a gross IRR of 14 to 16 percent, in line with the 15 percent gross IRR delivered by Fund I. More here

• Granite Asia, a Singapore-based multi-asset investment manager, is raising final-close capital via DBS Private Bank for its inaugural closed-ended private credit fund. The fund held its first close at $350 million in 2025, with anchor commitments led by Temasek and Khazanah Nasional, and is targeting a final close at $500 million. The strategy targets returns of 16 to 20 percent per annum, with investor cash yields of approximately 8 to 10 percent annually. More here

Investment Grade

• PGIM launched the PGIM Investment Grade Private Credit Fund, the first private credit collective investment trust designed for defined contribution retirement plans. The fund provides exposure to investment-grade private credit and is intended for use within target date funds, stable value funds, and other multimanager retirement structures. More here

Specialist

• Shamrock Capital, a Los Angeles-based manager specializing in media, entertainment, and communications, closed its $813 million Shamrock Capital Content Fund IV. Consistent with its predecessor funds, Content IV will focus on acquiring premium, cash flow-generating content and media rights across the evolving global entertainment landscape. The strategy’s current pipeline spans music, film, television, sports, video games, and creator economy opportunities. More here

Didn’t make this week’s cut

Dispersion Revisited

There’s been no let-up for CCC-rated loans, with spreads widening by over 300 bps so far this year.

In contrast, higher-rated credits have shown remarkable resilience: BB-rated loan spreads have marginally tightened this year, making for a yield of just over 6% – about a quarter of the level of CCCs. In short, the rating bands are a world apart, with the sort of aggressive bifurcation normally seen in a recession. So, what’s going on?

Market participants are expressing a clear view: the weakest credits cannot handle elevated interest rates and will struggle to refinance through mainstream channels. The fundamentals appear to validate this concern: leverage on CCC-rated loans has crept higher while other rating categories haven’t seen such increases.

Given the risk of default and the reality of poor recovery rates, buyers expect to be compensated in the form of an outsized spread. Meanwhile, higher-quality names continue to attract a broad buyer base, particularly from CLOs, thereby keeping spreads tight.

What if the universe of private credit is larger than you think?

Barings: What You Don’t Invest In Matters. Link

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

Every quarter, I summarise the 400+ pages of earnings transcripts from the largest managers. I do this for two main reasons:

1. It helps me understand the consensus views.

2. It brings to light unfiltered and occasionally provocative opinions.

This is the piece I look forward to writing every quarter. If you take away one useful insight, I’d really appreciate it if you could forward this newsletter on.

📚 Quotes of the Quarter

• Provocative Opinions

  • The Obsession with Levered Lending is a Failure of Imagination

  • Don’t Trust the Headlines, Focus on Fundamentals

  • The Illusion of Liquidity in Fixed Income

  • BDC Redemptions

  • Blackstone Says BDC Investors Knew What They Were Buying

  • Blue Owl Says Its Problem Loans Have Recovered 1.1x to 1.2x

  • Ares Says It Has the Most Credit Dry Powder

  • Why Blackstone Likes Being Capital-Light

  • Institutional Investors are Coming Back to Direct Lending

  • Blackstone Is the World’s Largest Investor in AI Infrastructure

  • Private Credit Has Contracted Once. Banks Have Contracted Eight Times.

• Consensus Views

  • Spreads, Pricing & Market Conditions

  • Deployment & Origination

  • Manager Strategy & Platform Growth

  • Market Risks, Bubble Debate & Big Narrative

  • Wealth, Retail & 401(k)s

  • Partnerships & Strategic Alliances

  • Returns & Performance

  • Portfolio Quality, Defaults & Non-Accruals

  • Fundraising & Capital Formation

  • Investment Grade Private Credit & Insurance Demand

  • Infrastructure & Data Centers

  • PIK

  • Saaspocalypse

  • Blue Owl’s 10x Gain on Space X

  • Secondaries

Transcripts can be found here

Provocative Opinions

The Obsession with Levered Lending is a Failure of Imagination

If there was one quote that best captured how large managers feel about recent press coverage, it came from Marc Rowan.

Apollo

The press remains fixated on a $2 trillion slice of this market, which should be called levered lending. Most of the financial press treats this as if it is the entire story of what’s happening in private markets and it is far from it. The investment grade private credit market, which is being driven by the global industrial renaissance, is a $38 trillion market. Therefore, the total opportunity in private credit is some $40 trillion.

The obsession with this very narrow corner of the market, this $2 trillion slice levered lending, is frankly, a failure of imagination. Credit, in any economy, only comes from one of two places. It comes from the banking system or the investment marketplace. There is no third choice.

Does that mean that risk has been transferred to investors? I don’t think so. What has happened in our marketplace and the growth of levered lending, particularly exposure to BDCs, is a rational move by investors who are looking to de-risk. Most of the investors in levered lending have come from the sale of their equity portfolio. Investors rationally have decided that they can earn equity-like returns from first lien risk, rather than by holding equity for a portion of their more speculative exposures.

Private credit is just credit. You underwrite it well and it performs. You underwrite it poorly and it doesn’t.

↩ Return to index

Don’t Trust the Headlines, Focus on Fundamentals

Managers are united in Marc’s frustration.

KKR

So our suggestion is don’t trust the headlines. Stay focused on the fundamentals and how we are executing. That’s what ultimately matters and how we are spending our time. This approach has served us well for the last 50 years, and we expect will continue to for the next 50.

BlackRock

There has been a lot of attention on private credit, but the headlines do not reflect what clients are telling us, what our portfolio data shows, or where we see the market going. Demand is structural. Private credit serves an important role in the financing ecosystem. Banks, governments, and public capital markets cannot fully address the world’s growth and investment capital needs. That is not changing.

Apollo

Almost all the spread widening we saw take place, took place in the media and did not take place in the market with the exception of below investment grade software and in IG software to some extent, where we did see spread widening, where we just do not have nor do we want meaningful exposure given the diverse set of outcomes that can happen with respect to credit.

BlackRock

Much of the focus has been on wealth vehicles like BDCs, interval funds, and tender funds. These funds make up around $550 billion in AUM — or about 25% — of the $2.2 trillion private credit industry. Institutional demand is actually accelerating.

↩ Return to index

The Illusion of Liquidity in Fixed Income

Apollo

Fixed income trading capital in the world is now 10% of what it was in 2008, and the market is three times its size. The entirety of the market, whether you are investment grade or below investment grade, is just not that liquid. It just appears liquid on good days. We have already seen wholesale breakdowns in the liquidity of this marketplace during COVID and during UK LDI, and I expect that we will see this again.

↩ Return to index

BDC Redemptions

The common message was that redemptions are manageable, concentrated, and much smaller than the headlines imply.

Ares Management

If these two funds were to experience 5% quarterly redemptions for a full year, with no gross inflows...It could impact our FPAUM by approximately 1% annually.

Ares Management

The majority of repurchase requests during the most recent quarter came from a limited number of family offices... Over 95% of our investors did not request redemptions.

Blackstone

Contrary to this popular idea that it is small investors leading the charge, it is actually a smaller number of large investors who are double the size, on average, of the typical account in these vehicles. They are the ones — we saw this if you went back to BREIT, and it is the same story here with BCRED. The great mass, by number, of smaller investors tends to stick with the product over a long period of time. It is the bigger boulders, as opposed to the pebbles, where you get more movement in terms of redemptions.

Blue Owl Capital

While the level of debate around private credit has resulted in elevated industry-wide redemption requests, the actual impact to Blue Owl Capital Inc.’s revenues and earnings for the first quarter was quite modest. During the quarter, net outflows of roughly $170 million from OCIC and OTIC were less than six basis points of our beginning-of-period AUM.

BlackRock

Much of the focus has been on wealth vehicles like BDCs, interval funds, and tender funds. These funds make up around $550 billion in AUM — or about 25% — of the $2.2 trillion private credit industry. Institutional demand is actually accelerating.

Blue Owl Capital

For OCIC, redemption requests were concentrated, with 1% of investors representing a majority of tenders, and approximately 90% of the investor base elected not to tender at all. Generally, requests have been more investor-led than adviser-led, highlighting continued strong support from our partners in what we believe has been a headline-driven, not fundamental-driven, redemption environment.

KKR

In total, direct lending is $39 billion or 5% of our AUM. It’s an important business for us, but in the framework of KKR, it’s of modest size. And with a lot of focus on redemption activity in the wealth space, we note the size of our private BDC is even smaller, around $3 billion of AUM or 0.4% of our AUM in total. In terms of our public BDC, FSK is a little less than 2% of our AUM.

↩ Return to index

Blackstone Says BDC Investors Knew What They Were Buying

Blackstone

What has been more challenging is that some of the social media and press reporting is so different than the facts that we see. When you think about these products, they are sold not directly to individual investors; they are sold through financial advisers who are obviously sophisticated. There is incredible levels of disclosure when we are selling these products. If you look at BCRED, on the cover page, there are six bold highlighted lines talking about the liquidity limitations in the product.

To me, it is not a surprise that we have more than 300,000 customers, and yet, we have not heard complaints from them that they do not understand that they are trading away some liquidity for higher returns.

↩ Return to index

Blue Owl Says Its Problem Loans Have Recovered 1.1x to 1.2x

Blue Owl Capital

We have gone back and studied all of the cases where we have had restructurings or material amendments driven by performance issues. The actual statistics are: our average principal recovery in those cases has been $0.80 on the dollar. When you incorporate that we actually had several coupons in on average in those instances as well, our actual recoveries in total on our problem situations have been 1.1x to 1.2x.

↩ Return to index

Ares Says It Has the Most Credit Dry Powder

Ares Management

As one of the largest institutionally backed private credit providers globally, we believe that we have the most credit dry powder of any public player in the market, totaling more than $100 billion.

↩ Return to index

Why Blackstone Likes Being Capital-Light

Blackstone

Running capital light can be a harder business model — you have to raise money from third parties as opposed to borrowing large amounts of money and earning a spread on that. But we do believe that, given what can happen when the environment changes and what the regulatory climate can look like, being an investment manager gives us the greatest flexibility. Operating a business with virtually no net debt and no insurance liabilities means that if we need to use capital to do something at the firm level, it is available. There is no moment where we are facing any sort of liquidity crisis.

We pay out basically 100% of our earnings between our dividends and our stock purchases. We like this capital-light model. We like being an open-architecture third-party manager for our investors. We think that is the right long-term approach. And particularly when you get to moments of volatility, you are not going to see redemption risk at a firm level. There is no credit risk at a firm level. We think this is an all-weather business model. It is why we have been through a lot of volatility, particularly in the last six years, and Blackstone Inc. keeps powering ahead.

↩ Return to index

Institutional Investors are Coming Back to Direct Lending

KKR

The shift we’re seeing in the last several weeks has been the institution is kind of coming back to direct lending a bit and saying, okay, I see all these headlines about wealth, that should mean that risk/reward is getting better on new deals. And therefore, I’m going to take a fresh look at it again.

↩ Return to index

Blackstone Is the World’s Largest Investor in AI Infrastructure

Blackstone

Today, we believe Blackstone has become the largest investor in AI-related infrastructure in the world... Our total portfolio now consists of over $150 billion of data centers globally, including facilities under construction, and it continues to grow rapidly, with an additional $160 billion in prospective pipeline development.

↩ Return to index

Private Credit Has Contracted Once. Banks Have Contracted Eight Times.

Ares Management

If you look over the last 25 years, U.S. private credit has contracted once, which was over ten years ago, versus the banking sector, which has contracted eight times over the same period.

↩ Return to index

Consensus Views

Spreads, Pricing & Market Conditions

Ares Management

The current environment is offering wider spreads, higher fees and better terms. With over $150 billion of available capital and a highly diversified platform, we are well positioned to take advantage of these conditions and deploy capital at more attractive risk-adjusted returns.

Oaktree Specialty Lending (OCSL)

We are encouraged that spreads on new private credit investments have widened to SOFR plus 500 to 550 basis points, approximately 50 to 100 basis points above the 2025 tights, and supports improved forward returns. We are also seeing modest improvements in documentation and more lender-friendly structures.

BlackRock

Private credit has historically offered asset-level yields approximately 150 basis points higher than comparable weighted traditional fixed income. New activity levels have been somewhat lower in the first quarter, which is seasonal and reflects market uncertainty. But new, regular-way direct lending is being quoted 25 to 50 basis points wider than where the market was in the fourth quarter, with select opportunities over 100 basis points wider.

ARCC

Spreads on first lien originations in the Q1 increased by approximately 20 basis points quarter-over-quarter, while leverage levels declined by nearly half a turn of EBITDA.

Blue Owl Capital

As Marc mentioned earlier, the market conditions that create volatility in public markets also tend to result in spread widening and a decline in available capital across asset classes. We are beginning to see this in the origination pipeline, with spreads at least 50 basis points wider.

↩ Return to index

Deployment & Origination

Ares Management

The transaction market environment for U.S. direct lending was slower in the first quarter as industry-wide deal count and middle market M&A declined by 41% in Q1 2026 versus Q1 2025 due to impacts from the Iran war, and changing inflation and rate expectations.

↩ Return to index

Manager Strategy & Platform Growth

Ares Management

I would remind everyone that Ares experienced its two fastest periods of growth during the GFC and COVID.

Blackstone

Operating a business with virtually no net debt and no insurance liabilities means that if we need to use capital to do something at the firm level, it is available. There is no moment where we are facing any sort of liquidity crisis.

Blue Owl Capital

Direct lending represents only 37% of Blue Owl Capital Inc.’s AUM. To put this in context, real assets is now 27% of AUM, and GP strategic capital is 22%. Nearly three-quarters of equity capital we have raised over the last twelve months has been outside of direct lending.

Ares

We are not changing the playbook. Our model has been the same for decades: originate a broad funnel and apply rigorous diligence and portfolio management to drive returns. Two underappreciated hallmarks: first, selectivity — we typically have a yes rate of about 5% across private credit. Second, incumbency — roughly half of direct lending deployment comes from incumbent portfolio relationships, which makes for easier, higher-conviction underwriting. Those two together have supported our loss rates, which across private credit have been trending close to zero.

Blackstone

In the back half of last year we took two companies public in the U.S., Allegion and Medline. Those stocks are up 160%. So if you bring good companies that have real earnings momentum, the market wants that. So I would say it breaks into different buckets. It is AI beneficiary companies — obviously digital infrastructure, some of the tech companies that are going to go public this year.

↩ Return to index

Market Risks, Bubble Debate & Big Narrative

Blackstone

BDCs and credit interval funds with redemption features represent less than 10% of the U.S. non-investment-grade credit markets. Meanwhile, the Treasury Secretary, leaders of the Federal Reserve and the SEC, and the heads of numerous financial institutions have now acknowledged they do not see systemic risk from private credit.

Ares Management

While private credit has expanded at low double-digit rates over the past decade, this growth tracks in line with the growth of the $5 trillion private equity sector and other private market asset classes. Also, the percentage of our economy’s GDP funded by corporate credit — including private credit, bank C&I loans, syndicated bank loans and high yield bonds — has not changed over the past decade. This indicates that the growth of private credit is not increasing the amount of leveraged credit in the economy, and is providing more consistent funding throughout business cycles.

Brookfield

We have no software exposure and our credit portfolio is performing incredibly well.

BlackRock

Over the last five to seven years, relatively benign credit markets have lifted all boats. As the overall market environment becomes more complex, we expect to see much more dispersion in performance among private credit managers. That is an environment we like to compete in.

↩ Return to index

Wealth, Retail & 401(k)s

BlackRock

I have been doing this for 20+ years. We have seen more advancements on private markets in 401(k)s in the last 12 months than in the prior 20 years.

↩ Return to index

Partnerships & Strategic Alliances

KKR

We are seeing more and more clients wanting to do more with fewer partners is absolutely playing out, especially as they see more dispersion of results. We’re heading towards more of a K-shaped industry.

↩ Return to index

Returns & Performance

Ares Management

Over the last twelve months, we generated time-weighted returns of approximately 12% to 15% in our U.S. direct lending strategies, 15% in Alternative Credit, 12% in Opportunistic Credit, 9% in European direct lending and over 20% in APAC credit.

Blackstone

At Blackstone Inc., we have generated 9.4% net returns annually in our non-investment-grade private credit strategies since inception nearly twenty years ago — roughly double the return of the leveraged loan market.

BlackRock

HLEND is one of the best-performing non-traded BDCs in the market. It has logged a 10.4% annualized total return since inception. It is one of the only funds among major peers with positive performance in 2026.

Blue Owl Capital

Our direct lending strategy generated gross returns of 8.5% over the last twelve months and, more specifically, our largest nontraded BDC, OCIC, has delivered an attractive 9.1% annualized return over approximately five years since inception.

Blue Owl Capital

In alternative credit, gross returns of 11% over the last twelve months have compared favorably to leveraged loans as well, outperforming by more than 600 basis points.

Apollo

If you look at the 21-year-plus track record there, the return coming out of ARCC has beaten the S&P 500, the syndicated bank loan market, the high-yield bond market, and probably most anything else that people have invested in. It’s a wonderful company and a wonderful structure.

↩ Return to index

Portfolio Quality, Defaults & Non-Accruals

Ares Management

Across our direct lending portfolios, we are seeing continued near 10% EBITDA growth, loan-to-value ratios in the mid-40% range, private equity funds continue to fund new transactions with a majority in equity, and improving interest coverage ratios of 2.2x.

Ares Management

Non-accrual ratios are well below historical norms, and we are generally financing much larger, more resilient businesses today versus past vintages. The relatively small number of credit issues we see are company-specific rather than indicative of broader trends.

Blackstone

BCRED’s borrowers reported low double-digit EBITDA growth for the most recent twelve-month period, while interest coverage has improved by approximately 40% over the past two years to 2.2x as rates have declined and earnings have grown.

Carlyle

In direct lending, our current nonaccrual rate is only 1%, and our inception-to-date loss rate over 13 years is just 8 basis points per annum.

Blue Owl Capital

Our average annual loss rate remains a very low 12 basis points, an important factor in driving our continued outperformance to leveraged loan and high-yield indices.

Blue Owl Capital

LTVs have picked up modestly, incorporating moves in public comps and broad-based spread widening. As a result, LTVs are, on average, in the low forties across our platform and in the tech lending portfolio, continuing to illustrate meaningful equity cushion below our senior secured positions even in the face of compressed equity market multiples.

↩ Return to index

Fundraising & Capital Formation

KKR

A real bright spot for us this quarter was in credit where we raised $15 billion across our platform. That momentum was driven by our asset-based finance business, which represents over $90 billion of AUM today.

Ares Management

We are on track for another record year of fundraising as we raised $30 billion of gross capital in Q1, which is our highest ever first quarter and is up 46% compared to last year’s record first quarter.

Blackstone

Inflows reached $69 billion in the first quarter and nearly $250 billion over the last twelve months, reflecting broad-based strength across our fundraising channels. Total assets under management grew 12% year over year to a new record level of more than $1.3 trillion.

Brookfield

We have raised $67 billion of capital so far this year including $21 billion during the quarter.

BlackRock

Clients awarded us with $130 billion of net inflows in the first quarter. That drove 8% organic base fee growth, representing our highest first quarter in the last five years.

Blue Owl Capital

We raised $57 billion of capital over the last twelve months, our second highest capital raise since inception, and $11 billion in the first quarter, which represents approximately 14% annualized on our AUM at the end of 2025.

Carlyle

On inflows, we had a great start to the year, attracting $13 billion of new capital.

KKR

We raised $28 billion of new capital in the quarter with demand really widespread across asset classes and geographies. A real bright spot for us this quarter was in credit where we raised $15 billion across our platform. That momentum was driven by our asset-based finance business, which represents over $90 billion of AUM today.

↩ Return to index

Investment Grade Private Credit & Insurance Demand

Blackstone

In Q1, our investment-grade private credit platform grew 23% year over year to approximately $130 billion.

Blackstone

Our model generated nearly 180 basis points of excess spread on credits we placed or originated over the last twelve months for our private investment-grade-focused limited partners.

Blackstone

In the insurance channel overall, our open-architecture, multi-client approach continues to resonate, with AUM growing 18% year over year to $280 billion — up fourfold in the past five years.

Brookfield

In April, we closed the acquisition of Just Group, a leading pension risk transfer platform in the U.K. This increased total insurance assets by $40 billion and we are now heading to $200 billion and strengthens our position in one of the world’s most attractive retirement markets.

↩ Return to index

Infrastructure & Data Centers

Blue Owl Capital

In fact, just a couple of months ago, Amazon announced a $12 billion data center campus with investment from Blue Owl Capital Inc.’s digital infrastructure funds... This marks the fourth data center project above $10 billion announced in less than eighteen months.

KKR

Digital infrastructure remains a massive theme for us. We’ve deployed over $40 billion of capital KKR plus our partners across a variety of digital infrastructure themes have over a 20% gross IRR return to date in terms of that activity for us.

Blackstone

Today, we believe Blackstone has become the largest investor in AI-related infrastructure in the world... Our total portfolio now consists of over $150 billion of data centers globally, including facilities under construction, and it continues to grow rapidly, with an additional $160 billion in prospective pipeline development.

↩ Return to index

PIK

Oaktree Specialty Lending (OCSL)

OCSL continues to be prudent around the use of payment-in-kind income, with PIK representing approximately 5.5% of adjusted total investment income during the quarter. This is down from 6.3% last quarter due to the sale of athenahealth PIK preferred at our mark.

↩ Return to index

Saaspocalypse

Blackstone

If you look at our software exposure in BCRED, for instance, the average borrower put up $3 billion of equity. So they have a lot of incentives here to make these investments work.

Oaktree Specialty Lending (OCSL)

Within our performing debt portfolio, 2 investments representing 2.9% of fair value are classified as having high AI risk.

Ares Management

The study graded each company on a spectrum of risk characteristics and concluded that our software-oriented portfolio is very well positioned, with 86% of the portfolio with low risk of potential AI disruption. Approximately 13% of the portfolio was classified as medium risk... and only 1% of the portfolio was categorized as having high risk of AI disruption.

Ares

New software deals are getting done where competitive moats are evident, and spreads reflect market anxiety. We are also using this market to exit select names where conviction is lower, which contributed to the gross-to-net outcome this quarter. More broadly, think about core systems — finance, cybersecurity, order management — firms are not ripping them out; they are layering AI to enhance them, and vendors are doing the same.

Ares Management

We are not seeing any credit deterioration broadly within software, as we have only one software company on non-accrual.

KKR

So just look to level set, software represents around 7% of our AUM. In private equity, it’s a higher percentage. It’s around 15% across our credit platform in total, it’s 5%. And in Global Atlantic, that number is about 2.5% of our AUM.

↩ Return to index

Blue Owl’s 10x Gain on SpaceX

Blue Owl Capital

Specifically at SpaceX, just as an example, we made about 10x our money on that investment. We have sold about half of it at a $1.25 trillion valuation, still holding about half of it.

↩ Return to index

Secondaries

Oaktree Specialty Lending

Secondary private transactions, whether through partial or full portfolio sales, will reshape the private credit landscape as certain market participants look to optimize their asset portfolio or satisfy liquidity demands.

↩ Return to index

Thanks again for reading. Let me know if you find these posts useful or how I can improve it for next quarter.

Share this with your Investor Relations Colleagues.

This newsletter is for education or entertainment purposes only. It should not be taken as investment advice.

The Milken conference brings together the world’s best minds to tackle some of the most urgent challenges. This year’s speakers included David Beckham, John Legend and Peyton Manning. Civilisation is in safe hands.

Alongside the minor matters of global health, education and democracy, Milken also found time for the question troubling every private markets investor:

“How do I get my money back?

Joking aside, there is a surprising amount of great content from Milken this year. I’ve pulled together a summary of my top quotes below with timestamps included for anyone who would rather not spend several hours watching private markets panels.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• Apollo: Europe is undergoing a structural shift in how companies access capital. Link

• Blackrock: Putting Private Credit Concerns in Perspective

• Powell: We don’t see any risk of contagion. Link

• FSB: Vulnerabilities in Private Credit. Link

• ILPA’s Guidance on Continuation Funds. Link (or if you’re the FT “Conflict Vehicles”)

• • 👉 Read Pitchbook’s report

Manager Updates

• Blue Owl made more than 10x on its SpaceX Investment. Link

• Apollo launches its Multi-Asset Prime Securities,

  • A structured credit product enabling access to more diversified and higher-credit-quality assets that are risk-managed every day.

  • In comparison to US BSL CLOs, the vehicle has a thicker equity tranche and is approximately 85% investment-grade rated by leading agencies, with underlying collateral that is more diverse and significantly higher rated. It was structured with investors in mind.

  • 👉 More here

BDC / Interval Fund Updates

• LibreMax Capital, a New York-based asset-backed manager, launched its first interval fund with $885 million of commitments. The fund invests in credit backed by consumer, housing, and commercial receivables.

Public BDCs are less crowded than the headlines suggest.

👉 Read the FT’s article here

Subscribe now

Milken Conference 2026

Below are my highlights from the Milken Conference last week. The link below the quote takes you directly to the video.

You’ll need to register for a free account but the amount of content is worth it.

Private credit dispersion has been abnormally compressed, not abnormally wide

“When you look back the last 10 years, the difference between a top quartile manager and a bottom quartile manager in private credit has only been about 250 basis points. So there’s been no dispersion. When you look at a typical or most other typical asset classes in credit, that’s normally about 500 basis points.”

Lee Kruter (GoldenTree Asset Management), Credit Outlook panel (04:05)

The retail money story is the real risk

“Most asset managers want to see a lot of this retirement money come into the market because it increases AUMs, it increases fees, it’s good for public company growth. I’m concerned about it... when all that money comes in, private credit, which should be an alpha product, becomes a beta product. It becomes no different than syndicated loan and fixed-income dollars... institutional investors all over the world are concerned about this. Not private credit, not about defaults, not about underwriting. They’re concerned about retail money coming into the funds that they invest with, and they do not want to see retail money invested side by side with them in institutional capital accounts because they’re concerned about deterioration.”

Ted Koenig (Monroe Capital), Private Credit Institutional Portfolio panel (29:30)

The 2022 vintage software loans never delevered

“If you look at a subset of broadly syndicated loans and software that were around in the end of 2022 and still around now, well, guess what’s happened? They never de-levered. The leverage is roughly the same as it was back then because the growth didn’t materialize in the way that they were hoping to, and if you bought them with a 40% LTV then, and equity valuations have come down, well, now you’re looking at least at 70 to 75% LTV on average.”

Brad Rogoff (Barclays), Banks Private Credit and the Future of Risk panel (42:00)

1,000 PE deals are stuck and many of them no one wants

“There were 1,000 transactions done in the PE community between 2015 and 2022 of $500 million or greater. Very few have exited. Some will find strategics, not that many. They’re all going to have to get sold. And a lot of them, nobody wants. Because the other filter for exits today, who is the buyer? Fidelity, a corporate, a CV. They only want the best.”

Jonathan Sokoloff (Leonard Green), Navigating Liquidity Challenges in Private Equity panel (09:20_

Asset-based finance is harder than direct lending, and the tourists do not realise that

“I think it’s a lot harder than private credit in the direct lending side. You need a lot of experience working with these non-bank originators, knowing how to look at the data, making sure you’re verifying your collateral... I think there’s a false sense of security sometimes that people can have when they see diversification and asset coverage on these deals... As people start to get attracted to this space, I think you’re going to see some tourists come in that probably don’t have that level of expertise.”

Jack (Fortress), ABF/ABL/Specialty Finance panel (24:08)

The scale gap, OpenAI round versus German growth funding

“The largest funding round agreed on for an OpenAI is $122 billion, right? The total collective growth funding in Germany last year was €8.4 billion.”

Hendrik Brandis (Earlybird Venture Capital), The European Opportunity panel (40:15)

Neuberger: Why the BDC Sell-Off Tells an Incomplete Story

Neuberger published a great piece on BDCs. Below are my highlights.

👉 Read the full report here

While BDC Assets Have Grown, They Remain a Small Part of the Private Credit Universe

Some investors may be missing the nuance of the private credit market, especially as the entire BDC universe, listed and non-traded combined, amounts to only about $500 billion.

Non-Traded BDCs: Redemptions Don’t Appear to Reflect Performance

Many of the larger BDC vehicles produced high single-digit returns last year, which compares favorably to a range of fixed income alternatives. Redemptions reflect other factors, including investor liquidity needs and a broader reassessment of portfolio positioning, rather than dissatisfaction with how the underlying assets have performed.

Listed BDCs Have Shown Wide Performance Dispersion Overall

👉 Read the full report here

💰Fundraising News

• Apollo closed its $6.5 billion Hybrid Value Fund III. The fund sits between traditional debt and equity, investing mainly in structured equity, preferred securities, and convertibles, and providing capital solutions for growth, acquisitions, shareholder liquidity, and balance sheet optimisation. Link

• Infranity, a Paris-based infrastructure investor, raised $2.7 billion for its Enhanced Return Debt Fund. Fifty percent of the fund’s capital will be directed towards climate solutions, with a focus on renewable energy and low carbon energy transition projects, as well as essential digital and social infrastructure. ERDF provides senior secured sub-investment-grade loans. The Article 8 fund targets an 8.5-9 percent gross IRR. More here

• S3 Capital, a New York-based private construction lender, closed its $1.3 billion Credit Fund III. The fund targets first-lien construction lending, primarily financing multifamily residential developments in supply-constrained US markets, and is expected to support approximately $4.3 billion of loan originations. More here

• Flexpoint Ford, a Chicago-based financial services investor, raised $1.1 billion for its Asset Opportunity Fund III and Insurance Opportunity Fund I. More here

• Audax Private Debt, a New York-based manager, closed its $1 billion private credit continuation vehicle led and structured by Pantheon. The vehicle relates to Audax’s 2018-vintage direct lending fund. More here

• LibreMax Capital, a New York-based asset-backed manager, launched its first interval fund with $885 million of commitments. The fund invests in private asset-backed finance and traded structured credit backed by consumer, housing and commercial receivables, and offers daily subscriptions with quarterly liquidity through repurchases.

• Corbin Capital Partners, a New York-based alternative asset manager, closed its first dedicated litigation finance fund with $342 million of commitments. The fund will finance commercial litigation, including business disputes, antitrust, mass torts, bankruptcy-related litigation, and intellectual property claims. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• KBRA: Q1 2026 Middle Market Report *** (Subject Piece) ***

  • Upper middle market defaults are doubling every quarter.

  • A record count of companies received a downgrade of two or more levels.

  • The decline in sales growth in the Financial Services sector was the highest among all sectors.

  • Roll-up strategies continue to experience stress, amplified by elevated leverage.

  • 👉 Read the full report here

• Peek under the Hood: An Analysis of Private Credit Loans in Top Public BDCs.

  • The all-in yield on first-lien debt, Sofr-referenced loans across ten BDCs, was 9.2% in Q4 2025, down 100 basis YoY.

  • 👉 Read Pitchbook’s report

    

• KKRs Wealth - Private Market Survey

  • 1,000 individual investors with $500K+ in investable assets, To get a clearer view into how individual investors are thinking about private markets,

  • Fewer than 1 out of 10 investors correctly identified that, 93% of U.S. companies with $50M+ in revenue are privately held.

  • 👉 Read KKR’s Wealth Survey

• Cliffwater: Ten Misconceptions About Private Credit. Link

Manager Updates

• Howard Marks calms down Andrew Ross Sorkin. Link

• BlackRock on Healthcare Growth Debt and Venture Debt.

• Lazard buys Campbell Lutyens for $575m. Link

• Brown University sells half its position in Blue Owl Capital Inc. Link

BDC / Interval Fund Updates

• Saba Announces New BDC Strategy to Address Retail Investor Liquidity Needs

  • The strategy targets entry points at discounts of 30-40% or greater to NAV,

  • Saba believes the question is not whether this space will experience significant stress, but when.

  • Read more

• Invesco: Navigating BDCs’ Growing Pains. Link

Timeline of Spread Differential of BDCs vs US IG

Source: Invesco

Partnership Updates

• ICEA LION, an East African provider of insurance and pensions, is looking to invest in pan-African private credit funds. It has a preference for managers that have strong relationships with DFIs, and are ideally on at least their second or third fund. Link

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Goldman Sachs on Private Credit

Goldman Sachs’ latest newsletter asks a lot of loaded questions. Hidden amongst the filler are a few genuinely interesting points. Below are my highlights.

👉 Read The Full Report Here

Redemptions Gates shouldn’t be surprised. But “should” is one of the most interesting words in the English language.

Howard Marks: “It’s absolutely true that investors participating in a fund that limits redemptions shouldn’t be surprised when full liquidity isn’t available. But “should” is one of the most interesting words in the English language. If people shouldn’t expect liquidity, why are they disappointed when they don't have it? The answer is either that they weren’t adequately informed, or they were well informed but didn’t understand or take cognizance of the terms. The risk of either of these is highest for retail investors, raising the question of whether these vehicles are suitable for the retail base.”

Software Loans won’t Jeopardize the financial system

Howard Marks: If the first-lien lender lost half their money in such a case, that wouldn’t be too bad in a diversified portfolio. If a quarter of the investments are in software and they all incur such losses, then the lender would lose half their money in a quarter of their investments, or 12.5% of the portfolio. And even if they’re levered 1:1, that would amount to a 25% loss, which still isn’t existential. There's an old saying that in times of crisis, all correlations go to one. In other words, everybody panics and sees all outcomes as equally probable and equally bad. But losing a quarter of your capital because the software industry loses most of its value isn’t abysmal. It's just bad for the fund’s investors. And it doesn't jeopardize the financial system

Loan valuations tend to adjust with a lag going into credit distress

Default incentives

Howard Marks: “And it’s important to note that in private credit, what constitutes a default—or even whether lenders will report defaults—is unclear. Lenders have an incentive to grant the borrower an extension rather than report a default, and nobody may be enforcing the reporting of defaults. Particularly for that reason, I wouldn’t put much stock in estimated default rates.”

Private credit defaults are not actually comparable to public credit

Amanda Lynam: “Some people compare defaults in private credit to defaults in public credit, but they are not actually comparable. Maintenance covenants—periodic financial metrics borrowers must meet—are much more common in private credit than in the broadly syndicated leveraged loan market. Because of that, a covenant breach in private credit can be classified as a covenant default, which counts in the default statistics. By contrast, roughly 92% of the broadly syndicated leveraged loan market is “covenant-lite”, meaning the loans don’t have regular maintenance covenants. Consequently, the first sign of default is often a distressed exchange or a missed payment, which can quickly translate into a monetary loss.”

Direct lending will be okay, but it might take a credit cycle to get there.

Howard Marks: “Only after investors have experienced a full cycle in which it swings from being too easy to borrow money to being too hard are they likely to really achieve the understanding of both the positives and the negatives that enables them to make better investment decisions the next time around. That’s ultimately a healthier investment environment, and it may be what lies ahead for direct lending and private credit more broadly. But learning that lesson isn’t always pleasant.”

Loans tagged as PIK-at-restructuring tend to see negative outcomes, but not always

Although investors often treat loans that are flagged as PIK-atrestructuring or non-accrual as reliable markers of future credit impairment, in practice the outcomes are more mixed than that characterization implies. Looking at over 3,000 loans tagged as PIK-at-restructuring, we find that 53% experienced negative outcomes, including principal writedowns, lower prices, or transition into non-accrual status, four quarters later. But over a third improved, either by exiting PIK status or increasing in price. So, while less favorable outcomes are more likely, negative outcomes aren’t a certainty.

s

Redemption requests have increased >6x over the last two quarters

👉 Read The Full Report Here

💰Fundraising News

Silver Rock Capital Partners, a New York-based alternative credit manager originally born from Michael Milken’s family office, raised $4 billion for its Tactical Allocation Strategy. The strategy provides capital solutions across corporate and real asset lending, targeting large borrowers globally. More here

Primary Wave Music, a music publisher and partner of Brookfield, closed its $2.2 billion Primary Wave Music IP Fund 4. The fund acquires music to generate consistent and long-term capital appreciation. To date, Fund 4 has invested $700 million in over 65 single-artist catalogs, including The Notorious B.I.G., Village People, and Neil Sedaka. More here

Apollo closed its $1.9 billion Accord Fund VII. The fund is the latest vintage of the Firm’s flagship Accord Dislocation Series, which has raised $11.6 billion since inception in 2017. More here

StepStone closed its $1.6 billion Credit Opportunities Fund II. The fund will invest across the private credit spectrum predominantly through secondaries and co-investment transactions. More here

Crescent Cove, a San Francisco-based manager, closed its $446 million Crescent Cove Fund IV. The fund lends to high-growth technology businesses, including businesses operating in defense tech, autonomous driving, AI infrastructure, and cybersecurity. More here

AllianzGI announced the first close of its $270 million Asia Pacific Infrastructure Credit Fund. The Fund provides secured loans to infrastructure and infrastructure‑like businesses predominantly across South and Southeast Asia. It is focused on energy transition, power, digital infrastructure, transportation and logistics, and environmental infrastructure. The fund is expected to hold its final close in 2027. More here

Hamilton Lane launched its Credit Income Fund, raising $350 million in commitments. The fund will invest in a portfolio of middle‑market senior loans, sourced through Hamilton Lane’s global multi‑manager platform rather than index‑based exposure. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

1. Coller Capital: Why Debt Levels Matter for Secondary Underwriting.

   • Coller analysed 1,789 PE exits to find out.

   • Loss rates rise to more than 30% when leverage increases more than 6x.

     

2. FT: Private credit won’t spark the next financial crisis. Link

3. Goldman Sachs: Taking the long term view on private credit. Link

4. Pemberton: Insights into European Private Credit. Link

5. Ares: Secondaries Take the Spotlight. Link

   

Partnership Updates

• KKR and Capital Group are launching a public–private credit fund in Asia later this year. Link

• MUFG is looking for partners to share risk. The bank ‌is aiming to limit funding through its own balance sheet so as not to bear the risk of financing deals as a wave of leveraged buyouts sweeps Japanese ​firms. Link

Manager Updates

• The Big Picture: Outlook from the Co-CEOs at Oaktree Conference 2026. Link

• Saba Capital to raise $1 billion to buy souring private credit funds. Link

• Pimco has lent more than $10 billion to state-backed and government borrowers in the Gulf, since the conflict began on Feb. 28. Link

• Lenders taking the keys on Medallia. Link

BDC / Interval Fund Updates

• Private credit BDCs trade at the deepest NAV discounts in over five years. The median listed BDC traded at a discount of 26% to NAV, the steepest gap since October 2020. Link

• JunkBondInvestor.Not all BDC debt is created equal.

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Sona AM: An Honest Assessment

Sona Asset Management’s honest assessment of private credit is well worth a read. I’ve pulled out a few of my favourite lines below.

👉 Read The Full Assessment Here.

Public scrutiny of private credit is now in full force and has almost certainly never been greater. Negative headlines are dominating the narrative: heavy exposure to software companies, redemptions and gating, criticism of portfolio marks, and banks marking down collateral posted by private credit firms.

SEMI-LIQUID STRUCTURES EXIST FOR A REASON

The creation of semi-liquid private credit structures was an innovation which expanded the market. There is no ambiguity as investors allocate to these vehicles with full knowledge of the terms - both on the way in and, critically, on the way out.

None of this makes the current moment comfortable for managers. Each redemption cap risks reinforcing a negative sentiment spiral at a time when the industry is already under scrutiny.

There are also legitimate questions surrounding the handful of managers who have chosen to honour redemptions above the standard 5% threshold - arguably rewarding first-mover behaviour.

Private credit is illiquid. That is known, priced, and agreed upon at the point of commitment. Sudden, large-scale withdrawals would compromise a fund's stability and potentially require premature liquidation of illiquid assets at a loss. Redemption gates are designed to prevent exactly that. They exist to protect the investors who stay just as much as they manage the investors who redeem.

AI AND PRIVATE CREDIT - LIMITED UPDSIDE, REAL DOWNSIDE

Private credit has a serious concentration problem in precisely the sectors AI is targeting most aggressively. Software is the clearest example.

These businesses were seen as predictable cash flow machines, and lenders piled in accordingly. Valuations reflected that enthusiasm, with median deal multiples reaching more than 15x annualised recurring revenue in 2026, layered with substantial debt. Those multiples have since collapsed to around 5x.

Estimates put average software exposure north of 20% of assets, with some funds potentially approaching 40%.

Credit investing is inherently asymmetric. Like equities, the worst outcome is a total loss. Unlike equities, the best outcome is par – investors get their money back plus coupon income. There is no participation in the upside

AN INDUSTRY BUILT TO ORIGINATE, NOT MANAGE.

The private credit industry was designed to originate. Its fee structures, staffing models, GP incentives, and fundraising narratives are all oriented around deployment. The implicit assumption embedded in the business model is that the most important decisions are made at origination and that if underwriting is done correctly, monitoring and management can be largely mechanical.

We believe this assumption is wrong. As a result, many private credit portfolios are not constructed; rather, they emerge as the accumulation of individual deployments.

A genuine portfolio management culture requires continuous reassessment of underlying assumptions. It means regularly asking whether the thesis on which an investment was underwritten remains valid; whether the competitive position of the borrower has changed; and whether covenant levels still reflect the underlying risk. It requires the willingness to mark assets to economic reality, to initiate difficult conversations with sponsors, and - crucially – the willingness and ability to walk away from an investment when circumstances call for it. This doesn’t apply to all managers.

However, there is clear evidence that portfolio management standards have deteriorated in parts of the market.

Why would a well-managed portfolio manager tolerate 40–50% exposure to a single sector – software – that was already showing signs of strain and emerging AI-driven competitive pressure? The answer often lies in incentive structures: managers who deployed capital most aggressively were rewarded with the highest fees and the largest subsequent fundraises.

This contrasts with public markets, where we would argue there is far greater discipline in recognising and exiting a flawed underwriting decision. As the lines between public and private credit increasingly blur, the managers who succeed will be those able not only to originate investments, but also to construct portfolios and actively manage risk - including exiting bad positions when necessary. Experience, or the lack of it, reinforces this problem.

Private credit has long been perceived as operating in a “golden age”, but cycles eventually turn. Managing a concentrated, illiquid portfolio through a credit cycle requires a fundamentally different skill set. The industry has scaled its origination infrastructure dramatically, and portfolio management capabilities, in many cases, have not kept pace.

A FLOOD OF CAPITAL HAS COMPRESSED SPREADS

The most transformative structural development in private credit over the past five years has been the influx of insurance capital, and the implications for the risk-return profile of the asset class have been profound.

According to Barclays, US life insurers’ overall general account investments are $6.1tn. They estimate that the sector’s allocation to private letter ratings – the best proxy for private credit – is about 10% (this includes some rated middle market CLOs and other similar exposures in the alternatives bucket).

Notably, they suggest that private credit assets in the US life insurance industry grew 21% in 2025, about twice the rate of growth of the overall general account.

The problem is not that insurers invest in private credit. Rather, it’s the capital dynamics they introduce. Insurance capital faces permanent deployment pressure - a liability structure that must continuously generate matching assets. This dynamic closely resembles the GP deployment incentive problem described earlier but operates at a scale that dwarfs any individual fund.

The result has been persistent spread compression precisely at a point in the cycle when spreads should be widening to reflect higher risk. Insurance capital has lowered the cost of private credit financing for borrowers at a time when credit quality, documentation standards, and macro uncertainty all point to the need for a greater risk premium.

👉 Read Sona’s Assessment here.

💰Fundraising News

Carlyle reportedly raisied $1.5 billion for its Asset-Backed Income Fund. More here

Ashmore, the London-based specialist emerging markets manager, is working with the European Bank for Reconstruction and Development to develop a $500 million private debt strategy. More here

Founders First Capital Partners, a US early-stage lender, announced a first close of $12 million for Change Catalyst Fund II. The fund invests in growing service-based businesses, generally with $1–10 million in revenue with commercial and government customers. While operating nationally, the fund emphasizes key regions of excellence including California, Illinois, Minnesota, Pennsylvania, New Jersey, New York, and the Washington, D.C. metro area. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• Golub: U.S. Middle Market Remained Resilient in Q1 2026. Link

• Brookfield: Why real asset lending is built for today’s environment. Link

Real Estate Credit Delinquencies Well Off the Highs

Manager Updates

• Nest, the largest UK workplace pension scheme, awarded Crescent Capital £450 million as part of a new direct lending mandate. Crescent will originate senior secured loans directly to US middle market companies. Nest’s plans to allocate up to 30% of its AUM to private markets by 2030. Link

• Blue Owl recorded its strongest share price performance since late 2022. The firm’s stock climbed roughly 17% over two days. Link

• Sycamore Tree Capital Launches Credit Secondaries Investment Platform. Link

“Soccer” Special

• Eagle Point provides a $50 million “asset-backed” loan to Sports Illustrated secured against World Cup tickets. The loan has a 100% LTV and targets mid-teens returns.

• Analysis of Ares Management’s $500 million investment in Chelsea Football Club.

  • The element that poses the greatest existential risk to the Chelsea Football Club ownership structure is its PIK mechanism.

  • At an annual compounding rate of roughly 12% to 13%, the initial £410.2 million principal will double in approximately six years.

  • If no cash repayments are initiated before the August 2033 maturity date, the total cost required to service, satisfy, and retire the preferred equity agreement will vastly exceed £850 million.

  • Read the full analysis here

Partnership Updates

• Sumitomo Mitsui Financial Group and Nippon Life Insurance are in discussions toward launching a $3 billion private credit partnership. Link

BDC / Interval Fund Updates

NAV BDC sponsors have returned more than $7.4 billion to investors in Q1

• Blue Owl Capital Corporation II declared a Q2 distribution of 5% of NAV. Following this, OBDC II will have returned 35% of NAV since March 2025. Link

• Goldman Sachs Nontraded BDC raised a $750 million bond. Link

• JPMorgan: Today’s elevated redemption requests appear to be driven more by sentiment than a broad-based deterioration in market fundamentals because credit fundamentals remain resilient. Link

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Ares: Let’s talk about the F word.

Ares in the Gaps is out, and as always, it’s worth reading in full (Link).

My highlight is the section on fraud, below with a few excerpts.

Recent reports of fraud in the market have left many with the impression that fraud can happen anytime, anywhere, to anyone...

And there’s precious little you can do about it.

That is just not true.

Fraud in financial markets is nothing new, neither are the means by which fraud is carried out. Fraud is a crime of opportunity. In that sense, fraud is not much different from home burglary, and neither are the perpetrators. Vulnerabilities and gaps in security are identified, often cultivated, and ultimately exploited.

Most victims don’t realize they are as vulnerable as they are.

Mitigating fraud is largely about minimizing both the means and opportunity.

Because one can’t fully eliminate the risk, it’s also about detecting it as quickly as possible. It’s about

• Locking the front door,

• Installing security cameras and alarm systems

• Placing a trained guard dog in the house for good measure.

It’s also about avoiding the neighbourhoods known for such crimes.

There are certain sectors in the ABF market that almost inherently create both means and opportunity for would-be fraudsters. Trade finance, high-rate consumer lending, life settlements and many corners within litigation finance. These sectors have intrinsic features that inhibit or prevent investors from mitigating fraud risk.

Consequently, they tend to be bad neighborhoods.

💰Fundraising News

Adams Street Partners, a Chicago-based manager, closed its $7.5 billion Private Credit III fund. The fund provides senior financing to sponsor-backed middle-market companies. PC III’s existing portfolio has a loan-to-value ratio below 40% and an average debt multiple of ~5x. More here

StepStone closed a $3.1 billion structured solutions vehicle for private market secondaries. Ares Management Alternative Credit will serve as the primary capital provider to the vehicle, with Barings Portfolio Finance providing a substantial portion of the vehicle's rated financing. More here

Comvest Partners, a Florida-based manager, rasied $2.6 billion for its Credit Partners VII. The strategy provides senior secured loans to US mid-market companies, with the ability to do transactions as large as $300 million. The invests in sponsored and non-sponsored businesses within target industries that include healthcare services, financial services, speciality finance, business and technology services, consumer and retail, and industrials. More here and here.

CapitaLand, a Singapore-based manager, closed its $320 million Asia Pacific Credit Program II. The fund invests in senior secured real estate credit across Asia Pacific. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Fundraising Updates

Last week’s post was tough reading but thankfully April has roared back with managers raising nearly $50 billion in first two weeks. For context, there was only $89 billion raised in the whole of Q1. Below with summary, see the full details here.

Manager Updates

• 🎧Promote Giving - A New Model for Performance-Driven Giving. Link

• Vista Credit is launching a Tactical Credit Fund to focus on software businesses that could withstand AI-driven pressure. Link

Market Updates

• 🎧Alan Waxman, CEO of Sixth Street, on the History and Future of Private Capital. Link

• Blackstone: Today's market looks nothing like 2008

  • Banks then were levered 25 to 40 times, primarily funded by short term deposits and commercial paper.

  • The underlying assets were 90%+ loan-to-value and layered on top were highly complex derivatives that obscured the risk.

  • This is nothing like what is happening today.

  • Business development companies typically operate with less than 1x leverage, lend at roughly 40% loan-to-value to corporate borrowers, and use structures that don’t rely on deposits or overnight capital.

  • Read more here

Partnership Updates

• King Street, the New York-based manager, signed an MoU for PIF to be an anchor investor in a new private credit fund focused on Saudi Arabia and the wider MENA region. Link

• Tikehau, the Paris-based alt manager, announced a joint venture with Amova Asset Management, one of Asia’s largest asset managers. Tikehau Amova Investment Management will be focused on developing Asia-focused private assets investment strategies for global distribution. The joint venture will include offering private credit focused on Asia. Link

BDC / Interval Fund Updates

• Moody's Reaffirms Blue Owl’s OCIC rating but changes outlook to negative.

  • The change in outlook to negative is in response to OCIC’s significantly higher-than-peer redemption requests in the first quarter.

  • OCIC reported net debt-to-equity leverage of 0.8x, which is lower than the peer median and $11 billion in cash, revolver capacity and Level 2 investments, which together could more than cover the full first-quarter redemption request.

  • In addition, OCIC has relatively limited unsecured debt maturities coming due over the next 12 months, consisting of $350 million in senior unsecured notes due in September and $500 million due in February 2027.

  • Deterioration in leverage or liquidity could weaken the company’s relative strengths at its Baa2 rating, which is at the top of the BDC peer group.

  • More here

The Rise of the Factory Model

Alan Waxman, co-founder and CEO of Sixth Street, appeared on Invest Like the Best. Below are my key highlights.

👉Listen to the interview here.

Everything that is covered in the media is just talking about the symptoms and not actually getting to the root cause.

The SMA was a symptom.

The wealth system is a symptom.

When you think about some of the stuff you see in stuck private assets, where there’s so many assets around the world in private real estate, private infrastructure, private equity, that literally were companies or assets that were bought in post-COVID, in sort of ‘20, ‘21, early ‘22 – paid way too much. They’re stuck assets.

All that stuff is symptoms.

The root cause of this is the change of behavior patterns of the factory model. That’s the root cause.

The Rise of the Factory Model

So the way that we define the factory model in our industry is there’s two parts to it and then there’s an output.

1. First part is the industrialization of the fundraising process. Say liability gathering. Literally raising as much capital as you possibly can, as fast as you can. So that’s the industrialization of the liability side of the fundraising side. That comes first.

2. And then what comes second is then, as a result of that, the industrialization of the asset side. So think about investing. If you’re on an investment team and all of a sudden your firm has a lot of money to invest, and it’s just sitting there and maybe there’s a timestamp on it. All of a sudden your behavior has to start to change, because you have to deploy that money much quicker.

And what’s the best way to raise a lot of capital quickly?

Make it very simple.

Make it very narrow, because if it’s wide, that’s too hard to explain.

So you want to make it as narrow as possible and you’re also willing to take – let’s say, make concessions on the type of capital you raise. Meaning maybe it’s got a term where they can ask for your money back.

When people hear this, they’re going to think I’m only talking about the bigger firms

But it filtered down to mid-sized firms, smaller firms for a whole bunch of reasons, but this whole factory model behavior started to reveal itself in 2018…

The story of the factory model starts to correspond with FRE multiples. Our industry started trading between 10 to 15 times FRE in early 2010s. In 2018, when all this started, it stepped up to – call it 15 to 20 times, obviously depends on the comp set. Before this current moment, we’re at 25 to 30 times plus. That’s where it is

You know when you see it.

You can see it in the underwriting. We're in a bunch of different asset classes. You can see it, particularly if you're a fixed income investor or credit investor because you have capped upside. There's terms you just don't give. A lot of those terms have been given.

You should not do those terms, because it’s all good when you’re in a procyclical environment. But if you have capped upside and you’re earning a 10% return and all the collateral that your 10% is based on can literally be taken out of your collateral package overnight.

Or for that 10% return, you can be levered up because let’s say there’s an AI disruption and some software company needs to reposition their business and they can basically lever you up. So you go from 50% loan to value to 120% loan to value.

Those are just things that you shouldn’t do for a 10% return.

There’s No Such Thing as Semi-Liquid

Some of the factory models that are out there have raised capital from the wealth channel in irresponsible ways. So first of all, in general, you’re taking an illiquid asset and you’re giving investors an ability to get their money back quarterly. They say semi-liquid. There’s no semi-liquid, okay, there’s no such thing as semi-liquid. Anyone that’s an investor that’s been through a bunch of cycles – there’s liquid, and then there’s illiquid.

Because again, going back to the history of the wealth channel or individuals or retail, the one thing we know, it’s very procyclical. We’re in a procyclical environment. It’s easy to raise money. And when you’re not, and when there’s problems or dislocation like there is today, they want their money back. So you basically had mismatching of illiquid assets and liabilities. So that’s one part of it.

The second thing is that they would raise these very narrow – what I mean by narrow is it’s just direct lending. So it’s not like you can invest in direct lending and real estate and infrastructure or in asset-based finance. No, no, it’s just very narrow. Just direct lending or just asset-based finance or just this strategy. That’s a narrow strategy.

And maybe that’s okay if you raise the right amount of capital. But if you raise an unlimited amount of capital where your investing is dictated, not on good investments in the market, but basically dictated by how much money you can raise. There’s never a governor on how much money to raise.

And the thing about these wealth vehicles, when they raise it, they have to invest it right away. We call it inflow investing. They have to invest it right away. So they raise as much money as they can, and if they don’t invest it right away, it dilutes the return of that vehicle.

The best answer is a market mechanism, like you have with institutional investors.

If you do irresponsible things or you're not a good investor, if you change your business model, they're going to punish you by not giving you money for your next fund.

What’s your clarity of purpose?

Does that stay consistent over time?

Is your clarity of purpose to raise a bunch of liabilities or is it to drive good returns for investors?

Maybe it’s both. Maybe you can do that. Maybe some firms can do that.

But, what is your clarity of purpose is something we talk a lot about at Sixth Street, is that if you look at all the great companies that have been around for a long time, they got one thing right. They never forgot what their purpose was, which is to serve their customers.

It’s enticing to raise a bunch of money. It’s enticing once you raise it to invest a lot of money. That doesn’t mean that you have to do it.

Sixth Street, we’re a multi-strategy private capital firm. We do a bunch of things. One of the things we do is direct lending. We have one of the best track records. We’ve been here longer than – in direct lending, I started the direct lending business in 2001 when there was only two of us.

So we’ve watched this and we could have gone to the wealth channel and raised all the same vehicles because of our track record. And we have – you know how many dollars of perpetual private BDCs we have? Exactly zero. It’s not that we couldn’t have. We just didn’t think it was the right thing and we didn’t think it was consistent with our clarity of purpose, and that’s why we didn’t do it.

It’s easy to get FOMO.

I just think you just got to block out that noise and it always comes back to first principles of clarity of purpose. What are your values? And if you stay consistent with that, judging by the best companies that have been around for a long time, that’s your pathway to building a great company that’s going to be here for a long time, not short-termism.

👉Listen to the interview here

Four Reasons Why Howard Thinks Oaktree will Outperform

Superior investing doesn’t result from omniscience and perfect decision making, but rather from decisions that are better than those made by others.

1. We’ve been investors in high yield bonds and broadly syndicated loans since their inception decades ago, but we never went overboard in private credit. As I mentioned a year ago in my memo, Gimme Credit, whereas for a few years the most popular question has been “can we talk about private credit?” my rejoinder has been “can we talk about credit?” We insisted there was a place in portfolios for both private credit and liquid credit.

2. We never pursued direct lending to the same extent as others. At the beginning of its existence in the early 2010s, we thought the returns from direct lending, while high in relative terms, were low in the absolute. And later, we thought the superiority in pricing and terms had been competed away by the newly arrived managers and capital, rendering it average in attractiveness, not exceptional. Private credit represents well under half of Oaktree’s performing credit assets, and direct lending represents less than half of our private credit book. Thus, direct lending is only around 20% of Oaktree’s investments in performing credit and less than 15% of our overall assets under management.

3. Since (a) we expanded our assets far less than many other alternative credit managers (Oaktree’s AUM “only” doubled over the last decade) and (b) direct lending was a limited part of our AUM growth, we’ve felt less pressure to invest quickly or compromise our standards. That meant we could remain highly selective, limiting the amount invested in software and restricting it to what we believe to be the best opportunities. Most of Brookfield/Oaktree’s private credit funds operate outside of direct lending and thus have only limited holdings in software.

4. 80% of Oaktree’s total investment in private credit is on behalf of institutional clients, meaning very little was placed with the public. While the leading managers of public direct lending vehicles have $40-50 billion or more there, we have just over $10 billion.

👉 Read Howard’s full memo here

💰Fundraising News

Opportunistic

Blackstone closed its $10 billion Capital Opportunities Fund V, its largest opportunistic credit fund raised to date. Blackstone’s opportunistic credit strategy has generated a 13% net IRR since inception in 2007. More here

Ares closed its $9.8 billion Special Opportunities Fund III. The fund provides private debt, equity and hybrid solutions that fill the gap between for-control private equity and more traditional corporate lending, while also opportunistically purchasing stressed public corporate credits. Since inception, the strategy has deployed over $17 billion and generated over $11 billion of realized proceed. More here

Blue Owl closes its $2.9 billion Asset Special Opportunities Fund IX. The fund employs a flexible mandate with the ability to allocate dynamically throughout changing market conditions. More here

Direct Lending

Guggenheim Investments, a New York-based manager, closed its $8.4 billion Private Debt Fund IV. The fund sources first lien senior secured loans in both sponsor-backed and non-sponsor-backed companies within the US core middle market. Guggenheim currently serves as the lead investor on over 90% of the capital invested by PDF IV and is the sole investor on 35% of invested capital. More here

Real Estate

ICG Real Estate, the real estate division of London-based manager, ICG, closed its $1.6 billion Opportunistic Real Estate strategy. The Portfolio comprises of approximately 100 assets on long-term, inflation-linked leases. It offers investors access to opportunistic returns within the European Industrial and Logistics sector, with assets typically sourced off-market through non-traditional routes, including proprietary sale-and-leaseback transactions with corporates. More here

Secondaries

Antares Capital, a London-based manager, closed its second continuation vehicle with over $1.7 billion in commitments. The transaction was led by Ares Credit Secondaries funds. The fund was established to purchase assets from a closed-end private credit fund comprising over 300 underlying first-lien, floating-rate loans. More here

Arcmont Asset Management, a London-based private credit manager, closed its $2.5 billion credit continuation vehicle. The transaction was led by Ares Credit Secondaries. The CV acquired a portfolio of largely first-lien senior secured loans from Arcmont’s 2019 vintage, Direct Lending Fund III. More here

Other

17Capital, a London-based NAV lender, closed its $7.5 billion Credit Fund 2. According to PitchBook, Credit Fund 2 represents the largest NAV loan fundraise. The fund provides NAV loans to well-established private equity funds across the U.S. and Europe. Since launching its dedicated NAV loan program in 2020, 17Capital has deployed more than $7.5 billion across 30 NAV loans, including $2 billion already deployed from Credit Fund 2. More here

OIC, a New York-based manager, closed its $1.6 billion Credit Opportunities Fund IV. The infrastructure fund invests in middle-market infrastructure. OIC’s target investment sectors include transportation, storage & logistics, digital infrastructure, renewable power and fuels, waste & recycling, energy efficiency and other infrastructure. More here

Mercer announced its $3.8 billion Private Investment Partners VIII. The fund offers investors access to a spectrum of global private assets across private equity, private debt, infrastructure, and real estate. PIP consists of a US vehicle for US investors (Onshore) and a Luxembourg vehicle for non-US investors (Offshore). The funds invest across primaries, co-investments and secondary opportunities. More here

Breakwall Capital, a New York firm specializing in the energy industry, and Vitol, a leader in energy and commodities, closed their Valor Mining Credit Partners II. The fund makes structured credit investments in mining and critical minerals companies. It primarily targets event-driven financing opportunities, including debt refinancing, acquisition financing, and development capital. In less than three years, the Valor energy credit franchise has invested over $2.1 billion to support the upstream oil & gas, mining, and critical minerals sectors. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

Private Credit’s Tough Reality

There’s no sugar-coating it. The fundraising environment has taken a noticeable turn for the worse. Fewer funds came to market, and those that did were smaller, with average fund size down nearly 10% year-on-year.

• Number of funds raised: 51 (DOWN 18% YoY)

• Total amount raised: $89 billion (DOWN 25% YoY)

• Number of Countries where funds were raised: 11 (DOWN 21% YoY)

Lending money isn’t hard. Getting repaid can be hard. The managers who understood that during the very good times are the ones who will stand out now in this less certain environment.

TCW: Looking Beyond Cockroaches and Canaries

Asia is the Growth Story 🌎

Asian private credit fundraising surged, with fundraising growing 10x year-on-year. While KKR’s latest $2.5bn Asia fund accounted for half of this, a growing number of managers are expanding their presence in the region. This momentum is being reinforced by partnerships, such as Citigroup’s collaboration with Blackstone, Blue Owl, and KKR.

Europe’s 70% decline is exaggerated by the absence of mega-funds this quarter. Last year, Ares raised $17.6 billion for its Ares Capital Europe V. Excluding this, the decline is closer to 40%

We’re taking this strategy global. When you think about why we were just in Japan, when you think about the Industrial Renaissance and that part of the globe, Asia Pac, along with how we’re focused on Europe, the answer to your question, big picture, is we’re going to take a very successful strategy of integrating origination to every aspect of our business.

Apollo Q4 earnings

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The Five Largest Funds Raised 60% of the Capital…

1. Churchill Asset Management’s $16 billion Senior Loan Strategy

2. GSAM’s $13 billion Mezzanine Partners IX

3. Benefit Street Partners $10 billion Real Estate Opportunistic Debt Fund II

4. Ares $7.1 billion Credit Secondaries fund

5. Monroe Capital $6.1 billion Private Credit Fund V

The Middle is Getting Smaller…

👉 This is the single most important takeaway this quarter: capital is concentrating at the top.

The average fund size for the top 5 managers is relatively stable:

• $10.6bn (2024)

• $11.0bn (2025)

• $9.7bn (2026).

The mega-managers raise the same amount of capital regardless of market conditions.

Everyone below these managers is under pressure. The average fund size for these dropped from $1.1bn to $0.9bn, and total capital raised has halved—from $64.3bn in Q1 2025 to $32.3bn in Q1 2026.

This is where the real dislocation lies. If you are a GP ranked outside the top 5, your available LP capital pool shrank by roughly 50% in twelve months.

📕Nick’s Top Articles for Q1

1. Q4 2025 Alt Manager Earnings: What the Biggest Firms Are Talking About

2. The Rise of Credit Secondaries

3. Three Takes on Blue Owl’s OBDC II

4. The Evolution of Private Credit in 2026

5. Howard Marks: Mistakes cause mispricings

Opportunistic Overtakes Direct Lending

Opportunistic capital surpassed direct lending for the first time on record with fundraising doubling over the last two years. Not only did they raise more, Opportunistic funds were also 70% larger than other strategies. Goldman’s $13bn mezzanine fund and Benefit Street’s $10bn CRE opportunistic fund were the standout funds.

For more on this trend, see Dispersion Is Back

Credit secondaries volume has set new highs every year post 2020. Credit secondaries fundraising tripled year-on-year, with Ares $7 billion raise leading the way.

For more on this trend, see The State of Private Credit Secondaries.

Direct Lending’s decline continues with 40% fewer funds raised YoY. Direct Lending accounted for 33% of new fundraising vs 66% in 2024. Churchill’s $16bn fund shows that mega-managers can still raise. The problem is for mid-market managers ($500m-$5bn). These funds raised 60% less YoY.

🏆 Nick’s Funds of the Quarter

During “risk off” periods, when risk premiums are attractive, both capital and liquidity leave the system. This is wrong-way risk for both the capital and manager

Sixth Street

🗄️ Brigade Capital’s $1 Billion Inaugural Private Credit Fund

In contrast to broader trends, Brigade raised its inaugural direct lending private credit fund. The New York-based manager will finance lower-to-middle market and non-sponsored borrowers.

⛏️ Orion Resource Partners’ $2.2 billion Mine Finance Fund IV

Orion, a New York-based manager, completed its largest ever fundraise. The fund finances the construction and acquisition of strategic metals and critical mineral assets. The fund is already 61% committed across a portfolio of projects, spanning North and South America, Europe, Australasia, and Africa.

🦒 XSML Capital’s $142 million African Rivers Fund IV

The fund finances SMEs in African frontier markets with loan sizes between $300,000 to $10 million. Investments to date are concentrated in the DRC (47%), Angola (22%), Uganda (17%), and Zambia (14%), across manufacturing, retail, beverages, food processing, and the pharmaceutical sector.

This newsletter is for educational or entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Manager Updates

• Partners Capital: Redemption pressure is generating opportunities within secondaries to acquire performing loans at material discounts. Link

• Dell Family Office Hunts Private Credit ‘Gems’ Amid Turmoil. Link

• CVC Credit Perspectives. Link

• Carlyle and Andalusian Credit Company launch partnership to invest in middle-market loan assets and other cash-flow-producing private credit interests. Link

Market Updates

• KKR: Thoughts From Japan Link

• Pemberton: Separating Signal from Noise and Why European Private is Credit Different Link

• Tikehau: A Search For Harmony. Link

BDC / Interval Fund Updates

• JPMorgan launches Public and Private Credit interval fund with 7.5% quarterly repurchase capacity.😉 Link

• Moody's Ratings downgrades FS KKR Capital Corp.

  • PIK income was 14.7% of FSK's total investment, significantly higher than the peer median of 6.3%.

  • FSK's debt-to-equity leverage increased to 1.30x compared to 1.11x.

  • The stable outlook reflects FSK's sufficient liquidity position, well-laddered debt maturities, and low absolute leverage on a debt-to-equity basis.

  • They expect its asset quality to remain challenged, driving more volatile profitability than peers.

  • More here

• Tikehau: Liquidity and Gating. Link

Mistakes cause mispricings.

Howard Marks shares his reflections on themes from Oaktree’s recent client conference. I’d recommend listening to his comments on buying from sellers who are making mistakes (10:36)

👉Listen to the interview here

Market efficiency means that every security is awarded a price, and if you buy it at that price, you get a fair risk-adjusted return. No more, no less…

We’re not happy with that. We want to get excess return, returns that are more than commensurate with risk. To do that, you have to buy assets, not at fair prices, but at unfair prices. We want to buy things for less than they’re worth. That requires cooperation for someone who’s willing to sell something for less than it’s worth.

And who volunteers for that job?

We want to buy from sellers who are making mistakes. And a lot of these in the history of Oaktree have also stemmed from people who bought companies and made mistakes. They overestimated the growth potential, overestimated the solidity of the earnings, overestimated the ability to survive or thrive in a negative economic environment, levered up too much, and eventually became distressed as a result.

What are some of the sources of the bargains we seek?

• Complexity - People don’t understand something, and they’re scared by its complexity.

• Difficult to source. - Some of these things are held deep in portfolios in the bowels of institutions, and we have to go find them and get somebody to sell them to us.

• Supply, demand - There are a lot of people who want to sell something at a given point in time, fewer people want to buy it, that pushes the price down, hopefully to unreasonably low levels where we can pick it up.

• Technical reasons - There was a rule for a while that if a bond was downgraded below investment grade, certain holders had to sell it. Now, they might not want to sell it if the price is unreasonably low, but the rules require them to do so. That’s technical.

In the last few months, the tide has been going out, especially in areas like private credit and we start to see which structures may have been unwise.We actually haven’t had many defaults yet, so we haven’t had a chance yet to see who made bad loans. That’s coming too.

We’re ready for shakiness in ‘26.

And I think that when the bloom is off the rose and people start thinking about the negatives and not just the positives, and when they start to reflect risk aversion and not just FOMO, I think we’ll get much better buying opportunities in the months ahead than we did in the months just passed.

👉Listen to the interview here

HALO 🏭 🚄

Hard Assets, Low Obsolescence

Asset light is out. Hard assets are in. Factories, fiber and railroads are the new celebrities of the investing world. Like most inflections, the trend has even earned its own acronym. HALO (Hard Assets, Low Obsolescence)

👉Read Apollo’s report here

HALO owes its existence to the growing angst surrounding increasingly powerful AI models and their potential to disrupt large swaths of the economy. Enterprise SaaS companies, whose revenue multiples have collapsed by 38% over the past six months, have borne the brunt of these obsolescence fears. But the wave of disruption anxiety has not stopped there; it has spread to a range of labor-intensive professions, including accounting, insurance brokerage and wealth advisory

Enterprise SaaS companies have collapsed by 38% over the past six months

The market is currently expecting $4 trillion of digital infrastructure investment by 2030

• For this investment to deliver an acceptable return, AI revenue must climb to $2 trillion by 2030.

• This is a 40x increase vs 2025 AI Revenue.

• Some of this will come from GPU-accelerated improvements to existing software workloads, like better advertising models and recommendation engines.

• But the bulk will have to come from genuinely new AI-driven products and services

$2 trillion of revenue is equal to the total size of the global enterprise software and online advertising markets combined.

• Admittedly, these industries do not have the ambition of AI which hopes to automate a large portion of the $60 trillion in global knowledge workforce compensation.

• Through that lens, $2 trillion represents only ~3% penetration.

Balance sheet capacity is becoming a gating factor across the AI ecosystem

• OpenAI finalized a $100 billion round, after previously raising a record-breaking $40 billion

• Apollo is most focused on how this multi-trillion-dollar investment in infrastructure will be financed and who ultimately bears the balance sheet risk if revenue realization lags.

• The faster AI-driven disruption converts into recurring revenue and free cash flow, the more self-funding the infrastructure buildout becomes.

👉Read Apollo’s report here

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💰Fundraising News

Pollen Street, a London-based manager, raised $2.1 billion for its Credit Fund IV. The asset-backed lender finances everything from building homes, funding SMEs, and vehicle financing. It provides predominantly senior secured loans to non-bank lenders, leasing businesses, and technology companies. More here and here

Treville Capital Management, a US-based manager, closed its $500 million Capital Solution fund. The fund invests across the capital structure, including senior secured loans, junior debt, and preferred equity in a wide variety of sectors. Link

SCOR Investment Partners, a French manager, raised $300 million for its Real Estate Loans V fund. The fund finances the renovation, restructuring, repositioning, or development of real estate across major European metropolitan areas. It invests through senior loans and targets an IRR of around 6%. Link

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

Private credit coverage surged to its highest level in March

What’s frustrated me most is how relentlessly clickbait the coverage has become, even when the underlying data has been broadly sound.

The pattern is always the same. A dramatic headline, a rush of commentary, and a far less dramatic reality underneath.

Exhibit 1: BCRED’s monthly loss

Flagship Blackstone credit fund posts first monthly loss since 2022
Financial Times | 2 days ago

Blackstone Private Credit Fund Has First Monthly Loss Since 2022
Bloomberg | 2 days ago

A lot of people sent me this story. But behind the headline, BCRED’s monthly total return was down just 0.4% last month.

I will repeat that, all of this noise was about a 0.4% decline.

Put differently, if you invested $100,000 in January 2021, you would still have roughly $160,000 today, despite this drop.

Exhibit 2: Cliffwater’s Negative Outlook

Cliffwater Private Credit Fund’s Outlook Cut to Negative by S&P
Bloomberg | 4 days ago

Press coverage also focused heavily on the negative outlook for Cliffwater’s BDC, particularly the redemptions.

In reality, S&P wrote:

We affirmed the 'A' rating on the fund because it maintains good asset quality, low leverage compared with peers, and satisfactory liquidity despite the wave of investor redemptions in the first quarter.

The nonaccrual loan rate has barely ticked up from last year and is well below 100 basis points.

Exhibit 3: Bank of America Shorts European Private Credit

BofA pitches bets against European private credit
Financial Times | 3 days ago

The media also seized on Bank of America’s call on European private credit.

But the very next day, BofA withdrew the recommendation and apologized for “factual inaccuracies”.

What has struck me most in all of this is the number of smart, informed people who have been drawn into debating these stories.

Private credit’s biggest danger may not be that the asset class is collapsing. It may be that enough people start to believe it is

📕 Reads of the Week

Market Updates

• Covenant Lite: What software investors can learn from the 2014 energy collapse. Link ***Recommended***

• Pimco analyses private credit’s illiquidity premium. The absence of continuous, mark‑to‑market pricing in private assets should not be viewed as a structural flaw. Rather, it reflects a distinct risk profile, one for which investors must be explicitly and adequately compensated. Link

• LCD’s Q1 Global Private Credit Survey. Link

Manager Updates

• Emerging managers to watch in 2026. Link

• Franklin Templeton launched a new target-date fund for 401(k) investors that includes a private market allocation. The fund allocates between 2% and 8% to private markets along the glide path. The private credit allocation will be implemented through the Franklin BSP Lending Fund. Link

• JPMorgan and Goldman provide hedge funds with tools to short private credit. Link

BDC / Interval Fund Updates

• Oak Hill Advisors is launching a new interval fund, OFLEX, designed to deploy capital across public and private credit markets. The fund will target a spectrum of credit opportunities, including direct lending, asset-backed finance, collateralised loan obligations, public credit, and special situations. Link

• Apollo Debt Solutions received redemption requests for 11.2% of shares. The fund will pay out the quarterly 5% repurchase cap. Link

Sixth Street: Investors in our industry have two choices, the “what” and the “when”.

If you want a blunt view of what is happening in private credit, Sixth Street’s letter is worth a read. Below are my highlights.

👉 Read the full letter

During periods of elevated volatility, it can sometimes be difficult to separate factual conclusions from emotions like exuberance and fear. But as investors, our job is to be aware of and discern the differences between the two.

From redemptions in the perpetual non-traded sector to the AI hype cycle to whatever comes next, our focus remains on the fundamentals. AI is a world-changing technology, but sentiment is leaving little room for nuance.

The current market discourse is conflating equity valuation volatility with fundamental credit risk.

Beneath what is grabbing today’s fearful headlines is the fact that over the past few years exuberance outran facts regarding BDC unit economics. The lack of disciplined risk management on the liability side of the business, specifically the shift towards gathering client funds intended to be immediately deployed rather than patiently invested, has led to structural underearning and looser protections on assets across the sector.

The result is what we see today: a BDC sector going through an intense yet warranted reset.

The dispersion between the minimum and maximum ROE is the widest we have seen.

Zooming out across the broader BDC sector, we believe most of the issues the industry is facing today result from structural risk management failures pertaining to liquidity and capital frameworks. Over the past several years, new vehicles designed with incentives that sacrificed robust capital and liquidity guardrails in favor of short-term asset gathering were introduced and proliferated, targeted at a largely retail client base with which the industry has shallower relationships compared to the institutional investors that initially funded the sector.

Investors in our industry have two choices, the “what” and the “when”.

Vehicles built on perpetual retail flows are vastly limited in both choices as retail capital ebbs and flows. You are limited on the “when”, because dollars that come in need to be put to work right away, and the “what” is therefore determined in large part by what is on the menu at that time. In addition, there is wrong way risk as it relates to flows. Flow levels tend to be the largest when risk premiums are at all time tights. You only have to look at 2024 and the Q1 2025 collapse in private market spreads. During “risk off” periods, when risk premiums are attractive, both capital and liquidity leave the system. This is wrong-way risk for both the capital and manager (as there is a promise and an expectation of liquidity, even if the fine print includes redemption gating provisions). These risks are borne by all shareholders.

Dividend cuts have nothing to do with credit losses

When you combine base rates of approximately 350 basis points today with new investment spreads that have dipped below 500 basis points, the resulting ROEs, even before accounting for credit losses, fall below both the industry’s current estimated cost of capital and the returns that were promised to investors.

To be clear, the dividend cuts that have started to proliferate across the BDC sector over the past few quarters have nothing to do with credit losses. The loss rates for private credit have been relatively stable. But the math will tell you the sector cannot fund current dividends at the spreads at which it has been deploying capital.

Given the overwhelming bulk of BDC assets are floating rate in nature, movement in dividend levels over time – both up and down – should not be surprising on its own. Post-COVID, as we moved into a pronounced rate rise cycle, asset level returns increased, leading to higher payout levels through increased dividends. Similarly, as we have seen reference rates decline from the peak last seen in mid-2023, the notion of lowering dividend levels should be in part a logical and expected outcome.

But it has been the combination of lower reference rates (largely a non-controllable factor for BDC managers absent negotiating for high floors), together with a deployment objective that prioritized capital out the door rather than return on equity, that has led to returns across the sector falling below the equity cost of capital threshold.

Due to a combination of headline-driven fear and weaker performance math, investor trust in direct lending has been damaged.

Liquidity is being taken wherever it can be found, leading public BDCs to trade down and perpetual non-traded BDCs to wrestle with whether to exercise gating provisions

History tells us that once trust cracks and liquidity is impaired, that cycle is difficult to quickly reverse.

If you believe in efficient markets, public BDCs trading at significant discounts versus similar private counterparts is an arbitrage that will resolve over time. Capital will be reallocated, and the public BDC sector should benefit as the liquidity-taking abates and discounts normalize.

The rebalancing of the ecosystem will take time to fully materialize, but it should ultimately result in the widening of new origination spreads and a healthy recalibration of the supply-demand dynamic for private capital.

In periods of significant redemptions, inflows tend to decline significantly.

As we witnessed during the redemption cycle that impacted non-traded REITs in 2022, flows are typically correlated in the sense that in periods of significant redemptions, inflows tend to decline significantly.

That is what we are now seeing in the non-traded BDC market. Utilizing liquidity for redemption activity (e.g., holding a liquidity sleeve in broadly syndicated loans) will, by definition, drive lower returns for non-traded vehicles; lower returns will result in increased capital flows to better relative return opportunities in other sectors of the market. We do not believe this environment will reverse in one quarter. If the non-traded REIT segment is any guide, this capital flow dynamic will last multiple years.

While some may believe today’s volatility is only a minor episode to be weathered, we believe there is going to be an honest reckoning for the sector resulting in a healthier and more resilient direct lending industry

👉 Read the full letter

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Hamilton Lane: Evergreen’s will dominate private credit

👉 Hamilton Lane: Evergreen’s will Dominate

The evergreen world has gone from, effectively, $0 to $500 billion in the last decade. And the top managers are vacuuming up impressive sums: The largest evergreen fund’s NAV exceeds the combined NAV of the five largest closed-end funds raised in 2024.

The credit fundraising market will increasingly be dominated by evergreen vehicles.

Will larger institutions embrace that form of investment for their credit portfolios?

They already are.

The growth in the size of the private credit market, together with the growth of the evergreen channels, will result in a small group of very large managers.

If you are not a major player in that space now or in the very near future, you will not have a meaningful private credit franchise. You might have a meaningful niche strategy or place in the market, but scale will increasingly matter in the credit space.

👉 Hamilton Lane: Evergreen’s will Dominate

💰Fundraising News

Goldman Sachs Asset Management is planning to raise $13 billion for its latest mezzanine debt fund, GS Mezzanine Partners IX. The fund invests in sponsored companies across North America and Europe. The fund will target net returns of 11%–13% using leverage, or 8%–9% on an unleveraged basis. More here

Orion Resource Partners, a New York-based manager, closed its $2.2 billion Mine Finance Fund IV. The fund finances the construction and acquisition of strategic metals and critical mineral assets. The fund is already 61% committed across a portfolio of projects, spanning North and South America, Europe, Australasia, and Africa. More here

Lone Star, a US-based manager, closed its $1 billion Residential Mortgage Fund IV. The fund invests in newly originated, performing U.S. non-agency mortgage loans. Non-agency borrowers generally include self-employed individuals and small business owners who do not have access to traditional agency and government-backed mortgages, despite often having strong credit profiles. With leverage, the fund is able to invest in over $10 billion of mortgage loans. More here

EOS Investors, a US-based real estate firm, announced a first close of $150 million for its inaugural hotel credit strategy. The strategy will focus on senior whole loans, mezzanine financing, and structured debt opportunities in the hospitality sector. More here

Walton Global, a US real estate manager, launched its U.S. Land Income & Growth Fund for offshore investors. The hybrid strategy provides senior secured loans to large national U.S. homebuilders. At the same time, the fund acquires pre-development residential land in U.S. metropolitan areas characterized by population growth, housing undersupply, and sustained homebuilder demand. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.

A close friend recently asked me why the Credit Crunch is so clearly biased in favour of private credit. Why don’t I link to the negative coverage? If you’ve had similar thoughts, I want to clarify that this is intentional, and there are two main reasons for this:

1. There’s no shortage of negative news. Why would you want your inbox weighed down by yet another predictable private credit bubble article? If that’s the kind of coverage you want, I’d encourage you to subscribe to two far more reputable publications: the FT and Bloomberg.

2. The future is shaped by tough-minded optimists. The leading managers aren’t sitting on the sidelines and giving up because they’ve had a few bad deals or a portion of their investors are concerned about their performance. The leaders are addressing the defaults, originating new deals, and raising their next fund. I’m focused on learning from these managers, and hopefully, reading this newsletter will allow you to do the same.

I’m always open to being challenged and would love to hear from you.

If you’re reading this on Outlook, most of the graphs won’t show. I’d recommend you read it online

📕 Reads of the Week

Market Updates

• Goldman Sachs: Taking The Keys: A Closer Look at the European Private Credit Market

  • Credit events in Europe are neither random nor evenly distributed.

  • Instead, they reflect an evolving macroeconomic backdrop and underwriting discipline.

  • Stress has not been market-wide; rather, it appears concentrated in specific segments

  • Stress events are likely to remain elevated relative to the last decade.

  • Manager selection in the asset class, therefore, should matter more than it has in the past.

  • 👉 More here

• 🎾 The Business of Pickleball: From niche to everywhere. Link

Manager Updates

• Deutsche Bank is expanding its private credit offerings. Link

• Apollo: The Evolution of Sustainable Credit. Link

BDC Updates

• Accredited Investor Insights takes a closer look at Cliffwater Corporate Lending Fund. Link

• Blue Owl recommends shareholders reject the unsolicited offer from Cox and Saba. Link

• Morgan Stanley received redemption requests for 10.9% of shares. The fund will pay out the quarterly 5% repurchase cap. Link

• Cliffwater received redemption requests for 13.9% of shares. The fund repurchased 7% of shares outstanding, which is the maximum amount permitted without changing the terms of the repurchase offer. Link

Partnership Updates

• Bank of Ireland and Kennedy Lewis announced a €2 billion partnership to originate and jointly finance European mid‑market buyouts. Link

• Dignari secured a commitment from the Abu Dhabi Investment Authority (“ADIA”) for its APAC Developed Markets Private Credit Strategy. The real estate fund will finance developers, construction companies, financial institutions, and investors in APAC’s developed markets, with a particular focus on Hong Kong. The strategy will target financing opportunities for residential, office, retail, student accommodation, serviced apartment, co-living, data centers, and logistics segments. Link

Hamilton Lane: Where Are the Signs of Stress?

If you’re looking for support for private credit, start with this year’s Hamilton Lane report.

👉 Hamilton Lane: Private credit fundamentals are solid.

20 years ago, private credit was a cottage industry

• There were only 466 closed-end funds, which were primarily mezzanine and distressed managers.

• Private credit is about 24 times the market size now.

• Over this time, private credit took almost 50% of the LBO financing market from the public and syndicated bank lending markets.

Let’s ask a question about that: At what cost?

• Do we think the recent spate of defaults and frauds is a function of private credit actions?

  • With the increased capital available

  • With the increase in market share

  • With the ongoing press about the pressures on private credit

• The casual observer would think that yields and spreads of private credit over broadly syndicated loans were collapsing.

That would be a completely incorrect assumption.

• Sponsors want private credit and seem willing to pay for what it has to offer.

• There is no sign of stress with these spreads or returns, relative to BSLs.

But let’s keep looking because we are incessantly told private credit is in a bubble.

• Here is one of the features of this current cycle that is different from prior cycles

• As prices went up for acquisitions, leverage levels didn’t follow them up.

• For all the talk of the desperate private capital providers throwing money at deals, well, they didn’t.

• The equity cushion, that layer below the credit providers, is large.

• Very large.

Tell us, where are the signs of stress?

• Where are the signs of a bubble? Sure, they may be metaphysical, beyond the comprehension of numbers. Even there, we’re not seeing it.

• Everything looks average.

• Even coverage ratios are getting better.

• Is it super bullish? No.

Is it super bearish with any indication of imminent danger or collapse? No. We’ll say it clearly:

Private credit is not in a bubble. If it’s not in its Golden Age, it is in its Silver Age.

👉 Read Hamilton Lane’s Report

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💰Fundraising News

Eagle Point, a Connecticut-based private credit manager, closed its $559 million Defensive Income Fund III. The fund originates and invests in Portfolio Debt Securities, which are primarily debt securities issued by credit funds to finance a portion of their portfolios. Since the launch of the strategy in 2020, Eagle Point has originated and invested in over $8 billion of PDS across a range of credit funds, including private credit funds, closed-end funds, commercial mortgage REITs and BDCs. More here

This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.